Insufficient Staffing – Litigation

Although inadequate staffing is a claim in many negligence and wrongful death lawsuits against nursing facilities, some litigation addresses insufficient staffing directly as the sole issue.  Two cases are discussed here: the New Mexico Attorney General’s recently-filed lawsuit against the twelfth largest nursing home company in the country, Preferred Care, alleging that the company provided inadequate care due to inadequate staffing, and the private litigation filed in California under state law, challenging facilities’ failure to meet minimum staffing requirements set by state law.

The New Mexico litigation, if successful, could be a model for litigation in other states because it combines staffing information from industrial simulation with facilities’ self-reported staffing and resident assessment data.  The possibility of replicating the California litigation may be limited to states whose state laws both set a minimum staffing ratio and provide statutory damages for violations.

STATE LITIGATION

State of New Mexico ex rel. King v. Preferred Care Inc. et al., Case Number D-101-CV-2014-02535 (First Judicial District Court, Santa Fe County, New Mexico, Dec. 5, 2014).

On December 5, 2014, New Mexico Attorney General Gary K. King sued Preferred Care, Inc., of Plano, Texas, and others, alleging that the privately-held company provided inadequate care to nursing home residents.  In addition to witnesses from the company’s New Mexico nursing facilities, the Attorney General relies on industrial simulation, showing how long it takes to complete various tasks, and demonstrating that the facilities’ own self-reported data showed that the facilities did not have sufficient staff to perform the tasks.[1]  Four of the company’s seven New Mexico nursing facilities receive “the worst grades for quality on Nursing Home Compare.”

In an introductory section, the 116-page Complaint describes defendants’ “scheme to generate outsized revenues at the expense of the physical well-being of vulnerable nursing home residents through false representations to the State’s Medicaid program and consumers about the level and quality of services they provided from July 1, 2007 to the present.”  Complaint ¶5.  Cathedral Rock Corporation sold its New Mexico nursing facilities to Preferred Care, Inc. in or around November 2012, following Cathedral Rock’s criminal felony plea bargains and civil settlement of False Claims Act litigation involving its Missouri nursing facilities.  Id. ¶1.  The New Mexico facilities have generated more than $229 million in revenues since 2008.  Most of the more than one million resident days are paid by Medicare and Medicaid, although some residents pay privately out-of-pocket.  ¶¶3-4.

Although residents have needs for Basic Care (defined at ¶¶6-7), “Defendants limited the number of [certified nurse assistant] CNA staff on duty . . . and rendered the facilities incapable of delivering the Basic Care that residents needed.”  ¶9.  The Complaint alleges, “The profound difference between the amount of services that Defendants promised and claimed to provide and the amount of services that the Defendant Nursing Facilities could have provided is at the heart of this case.”  ¶10.  It continues:

During the Relevant Period the Facilities completed, certified, and submitted to the state and federal governments individualized date-specific assessments – known as a Minimum Data Set or “MDS” – of the Basic Care required by and provided to every resident.  Using these MDS resident assessments and a widely-accepted industrial engineering simulation, the Office of the Attorney General (“OAG”) was able to determine the minimum CNA time required to care for these residents.  Using the Defendant Nursing Facilities’ self-reported staffing data, the OAG then calculated the total CNA hours available in the Defendant Nursing Facilities to provide this care.

¶10.  In addition,

Interviews with residents’ families and former employees, review of complaints received by the OAG, and analysis of survey results reported by the New Mexico Department of Health (“DOH”) all confirm the chronic understaffing of the Defendant Nursing Facilities and their failure to provide the Basic Care services that they were paid to provide.

¶11.  The Complaint identifies “the very human toll of understaffing . . . [which] cost residents their dignity and comfort, and jeopardized their safety” and “degraded residents and increased their risk of serious negative health consequences.”  ¶13.  The services “were not provided or were “fundamentally worthless.”  Id.

The Complaint then identifies the parties, including each of the facilities and its management company.  ¶¶16-46.

Omissions of care: The OAG calculated, for each facility, “the gap between the basic care needed and required and the basic care delivered.”  ¶51.A.  First, the OAG acquired from CMS the “[activities of daily living] ADL data for every resident in the Defendant Nursing Facilities on the last day of each quarter for the period of 2008-2013.”  ¶55.  It coded the care needs of residents into “one of seven recognized workload categories.”  Id.  Then, “utilizing these scientifically-established labor times and the minimum frequency each Basic Care service is required daily,” it developed “a workload score for each nursing home” on a quarterly basis.”  ¶59.  However, because “industrial engineering has long recognized that this formula significantly underestimates the total labor time actually required,” the OAG used a “more sophisticated industrial engineering tool – computer simulation – . . . to precisely calculate the total amount of labor required to provide the Basic Care claimed in residents’ MDSs.”  ¶59.  Combining “the workload category and 2-person assist data” derived from the facilities’ MDS data, the OAG developed “an objective basis for calculating the work demands placed on the Defendant Nursing Facilities’ CNAs.”  ¶62.

Labor time available for Basic Care: To quantify the amount of time available for Basic Care, the OAG used the staffing data reported by defendant facilities (for the two-week period preceding the annual survey) “to calculate the CNA labor supply, or number of CNA hours, available to each resident on a daily basis.”  ¶64.

Quantifying omissions of care: Using these two data sets, the OAG quantified omissions of care – “a significant disparity between the CNA staffing hours required to provide the Basic Care services claimed by Defendants in the MDSs of residents and the actual staffing hours available.”  ¶66.  The state alleges, “The needs of residents for Basic Care routinely overwhelmed the limited staff at their facilities, making it physically and mathematically impossible for the Defendant Nursing Facilities to provide the Basic Care that was promised, required, and paid for by the State and consumers.”  ¶67.

Basic Care omissions were confirmed by “eyewitness accounts” of residents and former employees of

residents being left in their own waste for long periods, residents not receiving adequate baths or assistance with personal hygiene, residents waiting 20-30 minutes for responses to call-lights when they sought assistance, residents falling when they attempted to go to the bathroom on their own because no help was available, and residents not being able to get sufficient foods or liquids because no one was available to help them.

¶68, and by state survey reports, although the Complaint notes that these reports likely underestimate care omissions.  ¶69 and footnote 9.

The OAG next alleges, “Defendants improperly billed for care that was not provided,” citing complaints by residents, families, and their own employees to demonstrate that “Defendants knew that their staffing practices compromised the delivery of Basic Care services.”  ¶70.  MDS forms included false certifications.  Id.  The New Mexico Medicaid program paid for care that was not provided, was not compliant with requirements, did not meet professional standards of quality, and “was so deficient as to be worthless.”  ¶71.

Relying on “its review of staffing and workload data, interviews with former employees, residents, and resident families, complaints received by the OAG, and deficiencies found by DOH,” ¶73, the OAG then provides a series of charts and detailed witness information demonstrating the omissions of Basic Care at seven facilities.  ¶¶74-140.

The OAG alleges that defendant facilities submitted false claims for Medicaid payments, ¶¶141-166, made deceptive statements to private payors, and engaged in unconscionable conduct, ¶¶167-175.

The OAG alleges that defendants knowingly failed to provide adequate CNA staffing, relying on the Institute of Medicine’s 2004 guidelines for nursing home staffing; defendants’ knowledge of their residents’ Basic Care needs; complaints from residents, families, and staff; deficiencies; and lawsuits.  ¶¶176-185.

Defendant C. Kent Harrington “was the majority stockholder in Cathedral Rock Corporation and owned approximately sixty-five percent (65%) of Cathedral Rock Corporation.”  ¶188.  On information and belief, OAG alleges that Harrington was president of Cathedral Rock Management, Inc. and president of each defendant facility.  ¶189.  Defendant facilities “operated their financial affairs on a consolidated basis,” ¶190, and Harrington “exercised operational control over the activities” of the facilities, including “setting staffing levels and budgets for the facilities, issuing policies and procedures for key aspects of the facility operations, and preparing annual cost reports for HSD.”  ¶191.

The complaint alleges that profits to defendant facilities “were passed to the Cathedral Rock Parent Entities as several types of expenses: management fees or central office costs and operations support provided by related parties charged to the Defendant Nursing Facilities.”  ¶192.  A chart detailed these costs for six facilities.  ¶¶194-195.

The OAG alleges, on information and belief, that the facilities were undercapitalized and “held substantially less cash and available liquid assets during this time period than were necessary to run the facilities or that were actually available to the Defendant Nursing Facilities through inter-company accounts or transfers within the Cathedral Rock corporate family.”  ¶196.

The OAG alleges that the Parent Entities “are liable for the acts and omissions of the Defendant Nursing Facilities during their period of ownership under an alter ego or agency theory of liability.”  ¶198.

The Complaint includes five claims for relief:

  • Count I: Recovery of state funds under the New Mexico Fraud Against Taxpayers Act, is §§44-9-1 to 44-9-14 [New Mexico Statutes Annotated] NMSA 1978.  ¶¶208-212.
  • Count II: Recovery of excess Medicaid payments under the New Mexico Medicaid Fraud Act, §§30-44-1 to 30-44-8 NMSA 1978.  ¶¶213-217.
  • Count III: Violation of the New Mexico Unfair Practices Act, §§57-12-1 to 57-12-26 NMSA 1978.  ¶¶218-225.
  • Count IV: Breach of Contract.  ¶¶226-229.
  • Count V: Unjust Enrichment.  ¶¶230-234.

Update: New AG will Pursue case – http://krqe.com/2015/04/02/new-mexico-pushes-claims-of-poor-care-at-nursing-home-chain/.

PRIVATE LITIGATION

Lavender v. Skilled Healthcare Group, No. DR060264 (Calif. Super. Ct., Humboldt Co.), 2010 WL 4926747.

In 2006, a class action lawsuit was filed on behalf of 32,000 current and former residents and family members of Skilled Healthcare Group’s (Skilled) 22 California facilities between 2003 and 2009.  Lavender v. Skilled Healthcare Group, No. DR060264 (Calif. Super. Ct., Humboldt Co.), 2010 WL 4926747.  Plaintiffs alleged that Skilled violated residents’ rights under the California Patient Bill of Rights (California Health and Safety Code §82528), which requires that facilities be adequately staffed.  Plaintiffs argued that “adequate personnel” means staffing levels as defined by the California Health and Safety Code §1276.5, which requires at least 3.2 nursing hours per resident day.  Plaintiffs also alleged that Skilled and its facilities violated the California Consumer Legal Remedies Act (California Business and Professions Code §1750 et seq) by contending that they complied with the state’s staffing standards.

Following a seven month trial, the jury found that the Skilled facilities were not adequately staffed for 13,118 days between 2003 and 2009, “based on internal staffing records, e-mails, and testimony.”  These 13,118 days were “multiplied by the number of residents (1,237,539 patient days) in all facilities.  Applying the maximum state penalty of $500 per violation of the Patient Bill of Rights, the jury awarded $619 million to plaintiffs.  The jury awarded an additional $58 million in restitution damages for violation of the Consumer Legal Remedies Act.

When Skilled threatened bankruptcy, the parties settled for $50 million, covering payments to class members, $22 million in attorney fees, and $500,000 in reimbursable costs.  “The class members received approximately $15 million, and the remainder was allocated to various institutions that help the elderly.”

The settlement also included injunctive relief that required Skilled facilities to comply with California’s staffing standard and to provide information to a court-appointed monitor for 24 months.  “Skilled was required to spend $9.6 million on the costs of the injunction and to pay any shortfall to the settlement fund.”

After the settlement, Skilled transferred five facilities to an unaffiliated operator who was not required to comply with the injunctive provisions.

A case study of Skilled Healthcare Group evaluated the impacts of both the class action lawsuit filed against the chain and state regulatory and enforcement activity.[2]  The researchers used court documents, state licensing, certification, and cost report data, and reports to the Securities and Exchange Commission.

Information about Skilled Healthcare Group’s nursing facilities

Skilled reported high resident acuity, 9-20% higher than the average California nursing facility between 2003 and 2009.  Article 791.  Its facilities reported that the number of residents receiving the rehabilitation services, the highest acuity level, increased from 44% to 67% over the period.  Its Medicare revenues increased from 34% in 2003 to 44% in 2009 (13-15% higher than the average California facility).  Id.

Skilled reported nurse staffing hours that were 8-10% lower than the average California facility.  Actual time records submitted to the court showed that for 13,118 days (one-third of total days of the 2003-2009 period), the 22 facilities had less than 3.2 total nurse staffing hours per resident day.

Between 2003 and 2009, the California Department of Public Health Licensing and Certification cited violations of the state staffing standard in 66 annual or complaint surveys, including immediate jeopardy deficiencies.  However, “[o]nly four civil money penalties were issued (ranging from $800 to $1,000) for staffing violations.”  Id. 793.  A total of more than $398,000 in fines were imposed against Skilled facilities between 2003 and 2009.  Id.

More complaints were filed against Skilled facilities than against the average California facility, ranging from 26-112% higher in each year but 2003.

Skilled facilities were cited with more than 3000 deficiencies between 2003 and 2009 and with more serious deficiencies between 2005 and 2009.  These deficiencies included 172 deficiencies and citations issued between 2003 and 2005 “for understaffing and poor quality, including deficiencies for four resident deaths.”  Id.  Eight deaths led to lawsuits, which Skilled settled.  Id. 795.

Skilled “established a regional payroll office monitor to track each facility’s daily nurse staffing reports in 2005 and . . . Skilled’s president and vice president (VP) of the Pacific Division were aware that many facilities reported under 3.2 nursing hprd on a regular basis.”  Id.  The article quotes various emails.  For example:

Guys – we need to absolutely tighten up the hours ppd, overtime reduction, the wages ppd and the amount of % increases we are giving.  Please obviously work to pump up total census days and make sure you direct your administrators to staff for a census that is 2% lower than they actually are running.  (Sent from the VP to facility administrators, November 22, 2005) Id.

Skilled facilities after the settlement

“Overall, the litigation and other factors appeared to have a negative financial impact on the company assets, profitability, and earnings per share, but not on its revenues, stock prices, and EBITDAR.”  Id. 802.  Its profits were more than three times the average California facility, following the settlement.  Id. 804.

Researchers’ discussion of findings

“The litigation confirmed the discrepancy between self-reported staffing to the state and actual staffing reported from payroll records, demonstrating the importance of using payroll records for reporting purposes.”  Id. 803.

Since the court-appointed monitor found that Skilled facilities complied with the state staffing requirement and yet problems in quality of care continued, the researchers suggest that California “consider increasing its minimum staffing requirements to the level recommended by experts (4.1 total nursing hours per resident day) and should use stronger enforcement sanctions for violations to achieve compliance with regulations.”  Id. 804.  The class action litigation “should be considered complementary to regulatory efforts,” but neither is sufficient by itself.  Id. 805.


[1] Jeff Horwitz and Susan Montoya (Associated Press), “New Mexico sues nursing home chain on care, staff,” Las Cruces Sun-News (Dec. 5, 2014), http://www.lcsun-news.com/las_cruces-news/ci_27076287/new-mexico-sues-nursing-home-chain-care-staff.
[2] Charlene Harrington, Julie Stockton, Sarah Hoopers, “The Effects of Regulation and Litigation on a Large For-Profit Nursing Home Chain,” Journal of Health Politics, Policy and Law, Vol. 39, No. 4, pages 781-809 (Aug. 2014), http://jhppl.dukejournals.org/content/39/4/781.long.