Reassessing Risk
The Cost of Liability
By Liz Osborn
 It is
not uncommon for providers of assisted-living facilities in some states to quote
increases of 200 percent to 800 percent in their annual liability premiums,
reported Robert Lohr before the U.S. Senate Special Committee on Aging on behalf
of the National Center for Assisted Living. He added that premiums, which might
have been $500 per small assisted-living facility with $300,000 to $600,000
limits, could now be $500 to $1,000 per licensed bed. Deductibles in some cases
are as high as $100,000.
As these higher liability costs spread from nursing homes to assisted-living
facilities, as state legislatures pass stricter elder-abuse laws, as the
frequency of injury claims rise and jurors award greater amounts of money,
liability insurance premiums have skyrocketed. In addition, decreases in federal
and state reimbursements have exacerbated the imbalance between profit and loss
and the assisted-living industry is struggling to remain viable.
Tort provisions in some states make it nearly impossible for providers to
defend themselves in court. "In the past year, 15 insurance companies have
left Florida due to the litigious environment," Lohr reported.
Coupling this increase in liability cost with higher salaries for staffing,
assisted-living facilities have been forced to reduce the cost of operating. One
way to do that is to decrease the number of employees. At the same time a cost
reduction is needed, there is also an increase in the acuity of resident
populations. With a combination of lower staff levels resulting in reduced
services, and higher acuity levels requiring more services, the number of
accidents and injuries has risen. In this environment, the assisted-living
facility becomes even more vulnerable to lawsuits and personal-injury claims.
"Insurance costs are only one part of the cost relating to injury.
Employee injury results in costs that are 10 to 20 times more than what the
direct insurance costs are," says Shep Tapasak, healthcare practice leader
with Royal & SunAlliance Insurance. He cites hidden costs such as lost work
time, low employee morale due to increased workloads, recruitment and training
of new employees, high staff turnover and reduced client services. All of these
results are difficult to quantify, but are substantial and can lead to even more
injuries.
 That
is why Royal & SunAlliance offers a unique program called Zero Accident
Culture® (ZAC). This cultural and service-oriented program focuses
on accident prevention through long-term partnering between the facility and the
insurance company.
ZAC is offered to many industries, and many of the 2000 to 3000
long-term-care facilities insured by Royal & SunAlliance have adopted this
program. Tapasak says the company's program, historically, is a result of
"focusing on ways they could partner with clients ... believing that
accidents shouldn't happen, they are preventable and can be eliminated or
reduced. Employee safety is linked to resident care. If you improve the safety
record of a facility you have improved resident care and you've reduced the
likelihood of liability."
"The first thing we focus on is the issues that are important to our
client besides just insurance issues," Tapasak says. Before any agreement
is reached, consultants, many with healthcare and long-term-care backgrounds,
visit on-site to meet management and understand how the leadership sees the
"nexus between their success and the need to control accidents," he
says.
If a partnership develops, risk identification continues throughout the
policy period. Consultants identify physical hazards, employee morale, state
regulations, accident history and financial losses, staff to resident ratio and
acuity levels of residents.
Early in the process, a business plan is formalized, a "no size fits
all" plan customized to the facility with each partner's responsibility
clarified. The plan takes various aspects of risk assessment into consideration
when selecting certain practices that will improve clinical and financial
outcomes and advance healthcare delivery systems.
One recommendation might be an improved safety-conscious attitude with
suggestions for staff training. Royal & SunAlliance has partnered with a
learning-systems firm that offers computer-based training with two interactive
components; the first is caring for residents, and the second is providing a
safe workplace for employees.
Other proposals might include improved tracking methods for injuries and
accidents, or the formation of a safety committee. The business plan is centered
on preventing negative outcomes by discovering the root causes of injuries and
accidents and removing them.
An overall higher premium must be passed along to the consumer because ZAC
costs Royal & SunAlliance more to deliver a level of service and expertise
than it does to offer an insurance package that does not include this program.
However, as each facility becomes more successful, liability costs decrease.
Success is measured by reduced employee-turnover rates compared to
competitors, higher morale among staff and management and less complaints from
residents and families. In turn, these positive outcomes can lead to higher
occupancy rates and improved reports from state surveys. "Most important, a
facility with ZAC is more attractive for residents and their families, which
helps to assure long-term success," says Tapasak.
Two critical issues often neglected are resident assessment and communication
with residents and their families. Assessment of residents' health and
well-being must be ongoing. Providers should properly identify needs as they
change, staffing their facilities with the appropriate caregivers to meet those
needs. If resident evaluations are not continuous and adjustments are not made,
facilities will be met with new challenges of increased accidents and injuries.
Tapasak says, "To become a better business, facilities must go beyond their
competitors, and that means taking more time to do what others are not."
Tapasak believes a large percentage of liability claims and lawsuits would
never happen if facilities did a better job educating the resident's family
about what aging is all about, what are reasonable expectations and documenting
those meetings. A zero tolerance of accidents appears critical if
assisted-living facilities are to stay in business, whether the provider
accomplishes this independently or with the help of an insurance company.
"Assisted living is an innovative long-term-care model that is
increasingly popular with the public," said Lohr. By all forecasts, this
will escalate as the aging of the baby-boomer population approaches. According
to the U.S. Census Bureau in March of 2000, the 65-plus population was nearly 33
million and by 2030, statistics indicate this elder population will reach 77
million.
Assisted living is in its adolescence, evolving in the mid-80s, offering a
middle ground between complete independence and nursing-home care. To ensure the
survival of this dynamic industry, facilities must manage their predictable and
preventable risks.
Liz Osborn is a writer and registered nurse. She has a bachelor's degree
in business management and a master's in business administration. She is the
former director of Good Samaritan Regional Medical Center's operating room and a
former corporate educator with Samaritan Health Service, in Phoenix. Osborn can
be contacted at lizwizz@home.com.
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