Dear Mr. President and Mr. Speaker:

On December 16, 2002, you appointed the Joint Select Committee on Nursing Homes to address the continuing crisis facing Florida’s nursing homes in both obtaining and maintaining adequate insurance coverage. The information contained in this letter is the report of the Joint Committee.

The Joint Select Committee on Nursing Homes met five times during January and February. At
the first four meetings the committee heard testimony from the interested stakeholders, the
Agency for Health Care Administration and the Department of Financial Services. We received
written input before, during and after our meetings. We heard testimony from a wide variety of
interests: the for-profit and not-for-profit sides of the nursing home industry, regulators at the
Agency for Health Care Administration, representatives of the Department of Financial Services,
insurance companies, attorneys who bring suits against nursing homes, unions who represent
nursing home employees, nursing home administrators, nurses employed by nursing homes,
Certified Nursing Assistants employed by nursing homes, physicians practicing in nursing
homes, representatives of consumers (AARP and the Coalition to Protect America’s Elders), and
representatives of residents in continuing care retirement communities. We received over 30
written proposals for statutory changes and funding increases.

In the testimony we received, there was consensus that the Legislature accomplished important
reforms with the passage of CS/CS/CS/SB 1202 in the 2001 Session. The bill required an
increase in staffing in nursing homes, strengthened regulatory enforcement and quality oversight,
established risk management and adverse incident reporting in nursing homes and provided
significant tort reform. We received no proposals recommending that we retreat from the staffing
standards established in this bill.

After hearing the testimony, there is general agreement among the members of the Joint
Committee that:

• General and professional liability insurance is still difficult to come by and is expensive;
• The state does not have objective, reliable data on lawsuits against nursing homes;
• Nursing homes are having difficulty in attracting and keeping quality direct care staff;
• Although it appears that quality of care in nursing homes is improving, we do not yet have objective data to demonstrate that regulatory activities of the state are effective in ensuring resident safety; and
• Nursing homes are under financial stress due to increasing insurance premiums,
• increasing staff salaries, and increased staffing standards.

It is clear, that many good nursing homes in Florida are facing increases in insurance premiums
and difficulty in obtaining liability coverage. The requirement in CS/CS/CS/SB 1202 that
facilities maintain general and professional liability coverage has resulted in some facilities
purchasing minimal liability coverage, and being forced to pay premiums that exceed the face
value of the policy, in order to comply with the law. We heard testimony, however, that for
nursing homes with a good track record and strong internal risk management, liability insurance
is available.

We were told by the Florida Life Care Residents Association, which is made up of residents of
Continuing Care Retirement Communities (who pay the entire cost of care themselves), that
increasing liability insurance costs of their providers are being passed on directly to their
members.

There is a considerable body of opinion indicating that we simply do not know yet whether or
not the changes made to the nursing home tort system in CS/CS/CS/SB 1202 will have the
desired effect of attracting liability insurance carriers back into the state. There is some suspicion
that suits that are still working their way through the courts are suits that predate
CS/CS/CS/SB1202 and the new standards for civil enforcement, and that until these are resolved
and the law has been in effect for some time, enabling insurance companies to develop a record
of actual judgments in nursing home cases using the new civil enforcement standards, liability
carriers will be hesitant to return to the state.

The Joint Select Committee on Nursing Homes makes the following recommendations.

Liability Claims
We recommend that for nursing homes, the Legislature consider enacting a voluntary binding
arbitration system similar to that which is currently in effect for medical providers such as
doctors and hospitals. However, the committee was concerned about the differences between
nursing homes and medical providers, particularly in the application of medical malpractice
laws. Specifically we recommend:
 

• Enactment of voluntary binding arbitration in the civil enforcement provisions in chapter 400, F.S., for claims arising out of the rendering of, or the failure to render, medical care and services in nursing homes, similar to the voluntary binding arbitration provisions in section 766.207, F.S., for medical negligence.
• If the parties agree to arbitration, and the defendant does not contest negligence, causation and liability, non-economic damages are capped at $250,000.
• If the defendant requests, but the plaintiff refuses binding arbitration, non-economic damages at trial are capped at $350,000.
• If the defendant refuses arbitration, and the case goes to trial and the plaintiff obtains a determination of liability, there would be no limitation on non-economic damages.
• In the instance of either intentional misconduct, gross negligence, conduct motivated primarily by unreasonable financial gain, or conduct in which there was specific intent to harm the claimant, punitive damages are appropriate. The punitive damage provisions of ss. 400.0237 and 400.0238, F.S., must be available to the claimant or claimant’s representative.
• The right of adult children of individuals in nursing homes to bring suit should not be limited.
• Further deliberation is necessary on how to substantively and procedurally resolve incidents determined to be either intentional misconduct or gross negligence.
• Economic damages should not be paid in periodic payments or be reduced by future collateral source payments.
• Non-economic damages should not be calculated based on a percentage basis with respect to future capacity to enjoy life.
• When nursing homes are the subject of repeated claims resolved by arbitration in which liability, causation, and negligence are not contested for similar breaches of standards of care, the licensee should be investigated by the Agency for Health Care Administration.

• The Legislature should review and clarify the liability of nurses working in nursing homes.

It became clear to the Joint Committee that the lack of objective information on the number of
suits that are filed and the ultimate outcome of the suits has led to a situation in which all sides of
the debate can cite the same AHCA data to “prove” opposing points of view. We believe that if
we do not establish a source of reliable information with which to monitor lawsuits against
nursing homes, we will repeatedly face this dilemma. We therefore recommend:
 

• The Legislature should require courts to identify liability claims brought against nursing homes under s. 400.023, F.S., in their data bases. The proposal could be carried out in several ways:

• The Legislature should require AHCA to collect information on claims filed against previous owners of nursing homes when there is a change of ownership, not just claims against current licensees.
• The Legislature should amend s. 627.912, F.S., to include nursing homes in the list of entities for which insurers are required to report closed claims.

CS/CS/CS/SB 1202 required all nursing homes and assisted living facilities to have insurance.
The committee heard testimony that in some instances nursing homes are charged premiums that
are higher than the coverage limits of the policies. The only exception to the requirement that a
nursing home maintain general and professional liability insurance coverage is in the case of a
state-designated teaching nursing home and its affiliated assisted living facilities, created under s. 430.80, F.S., which may offer proof of financial responsibility in a minimum amount of
$750,000, as provided in s. 430.80(2)(h), F.S. The Risk Retention Group that was authorized in
CS/CS/CS/SB 1202 to make available affordable insurance coverage for high quality nursing
homes has only recently been approved to offer coverage and is not yet operational.

Under ss. 458.320 and 459.0085, F.S., medical physicians and osteopathic physicians are
permitted to demonstrate financial responsibility for paying claims and costs ancillary thereto in
a variety of ways. They can establish and maintain an escrow account, obtain and maintain
professional liability coverage, or obtain and maintain an unexpired, irrevocable letter of credit.
Physicians who meet certain criteria are also permitted to go without insurance as long as
specified notice is provided to patients.

To assist facilities that would be able to demonstrate financial responsibility, the Joint
Committee recommends:

• The Legislature should permit nursing homes to demonstrate financial responsibility to pay claims and costs ancillary thereto in ways other than through professional liability insurance coverage – similar to physician financial responsibility requirements, by extending the exception allowed for a state-designated teaching nursing home to all nursing homes and assisted living facilities.

• The Legislature should require an examination of the prevalence and reasons for insurance rate increases and cancellations for physicians practicing in nursing homes. 

In the 2002 Session, SB 59E directed the Agency for Health Care Administration to allow
Medicaid nursing home rate increases to reflect the cost of general and professional liability
insurance for nursing homes. The bill removed a restriction limiting increases to the class ceiling
for a facility. The General Appropriations Act allocated funding of $27 million for this action.
This funding resulted in an average increase of about $1.69 per day. As of January 1, 2003,
75 percent of the nursing homes report receiving a payment for their operating cost component
(the component of the Medicaid rate that contains liability insurance) that is below their allowed
costs. The average shortfall is $6.74 per day.

Joint Committee members questioned the prevalence of fraud and abuse of the Medicaid nursing home payment system. Testimony was presented that indicated that there were potential savings in Medicaid nursing home expenditures by increased AHCA oversight of Medicaid payments to nursing homes.
Therefore, the Joint Committee recommends that the Appropriations Committee in both
chambers review the methodology for reimbursing nursing homes to determine the
appropriateness of:

• Increasing direct care gross-up by 7 percent to cover the cost of complying with staffing minimums;
• Using an inflation factor that more accurately reflects the cost of required direct care staff in the direct care component of the Medicaid nursing home rate;
• Rebasing the Medicaid nursing home rate system to allow nursing homes to recoup the Medicaid portion of costs associated with purchasing general and professional liability insurance for nursing homes; 
• Requiring all nursing facilities to file a final cost report when there is a change of ownership, even if the cost report is for a partial year and require facilities to pay a $100 per day fine for late cost reports; and

Staffing Recommendations
The Joint Committee heard testimony regarding the difficulty long-term care providers are
having meeting the requirements of CS/CS/CS/SB 1202 as it pertains to adequate staffing levels.
Facilities testified that the minimums in law have created a situation of high demand for scarce
nurses, driving up salaries. Certified nursing assistants testified that workloads in nursing homes
have dropped dramatically, leading to increased attention to frail residents, however, wages and
benefits are still inadequate.

• The Legislature should develop a certified geriatric nursing classification geared toward Certified Nursing Assistants who are increasing their skill level and receiving additional training in the medical aspects of providing care to the elderly in long-term care facilities. A new certified geriatric nurse classification could allow nursing facilities to provide their more capable Certified Nursing Assistants with a career ladder that would enable them to access higher rates of pay and benefits.

• The Legislature should require that nursing home admission contracts be in compliance with all provisions of chapter 400, F.S.
• Allow nursing home residents who are victims of adverse incidents or their responsible party, to obtain a copy of the adverse incident report sent to the Agency for Health Care Administration, and the results of the agency’s investigation.
• Revise the Agency’s “Guide to Nursing Homes in Florida” by adding the following information for each nursing facility:

Thank you for recognizing the importance of these issues and for providing a forum for interested parties to participate.

Sincerely 

(signature)                                                                  (signature)
Lisa Carlton                                                               Carole Green
Chairman                                                                   Vice Chairman