2017 Long Term Care - AHCA/NCAL · The specific objectives of this study are to: § dentify the...

2017 Long Term CareGeneral Liability and Professional Liability Actuarial Analysis

November 2017

Aon Risk Solutions

Table of Contents

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2

Key Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2Liability and the Long Term Care Profession . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2Advisory Estimates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3State Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Countrywide Estimates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4

Indemnity and Expense Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6

Cause of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8

Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10

CMS Five Star Ratings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14

California . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18

Florida . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20

Georgia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22

Illinois . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24

Indiana . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26

Kentucky . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28

Maryland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30

Massachusetts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32

New Jersey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34

North Carolina . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36

Ohio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38

Pennsylvania . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40

Tennessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42

Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44

Virginia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .46

West Virginia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48

All Other States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50

Database and Collection Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . .52

Actuarial Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .53

Conditions and Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .54

Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .55

About Aon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .58

Introduction

Purpose

Aon Global Risk Consulting’s (Aon) Actuarial and Analytics practice conducted an actuarial analysis of general

liability and professional liability (GL/PL) claim costs for the long term care profession in the United States .

Scope

The specific objectives of this study are to:

§ Identify the overall trends in the cost of GL/PL claims for long term care

§ Identify state specific trends in the cost of GL/PL claims for long term care

§ Identify trends in frequency and severity overall and on a state by state basis

§ Present closed claim statistics related to expense versus indemnity

§ Explore the impact on arbitration on GL/PL claims costs

§ Examine differences in GL/PL claims costs by Medicare Five Star Rating

An overview of the findings can be found in the Executive Summary section of this report .

Please contact us if you have any questions regarding this report .

Respectfully submitted,

Christian Coleianne, FCAS, MAAAAssociate Director and Actuary 1 .410 .309 .0741christian .coleianne@aon .com

Donald Riggins, FCAS, MAAA, CPCUAssociate Director and Actuary1 .410 .309 .4539donald .riggins@aon .com

Konstantin SakherzonSenior Actuarial Analyst1 .215 .255 .1806konstantin .sakherzon@aon .com

Kanika Vats, FCAS, MAAAAssociate Director and Actuary1 .212 .441 .1452kanika .vats@aon .com

Meredith Huskey, ACAS, MAAAConsultant and Actuary1 .410 .381 .1876meredith .huskey@aon .com

Stephen Park, ACAS, MAAAConsultant and Actuary1 .213 .996 .1569stephen .park@aon .com

Aon Global Risk Consulting 1

Executive Summary

Key Findings

Based on the actuarial analysis of GL/PL claims data from long term care providers on a national level:

§ Long term care loss rates are increasing by 6 .0% annually .

§ The overall forecasted 2018 occurrence year long term care GL/PL loss rate limited to $1 million per

occurrence is $2,450 per bed .

§ Long term care frequency is increasing by 2 .0% annually .

§ The forecasted 2018 occurrence year long term care GL/PL frequency is 1 .05 claims per 100 occupied beds .

§ Long term care claim severity is increasing by 4 .0% annually on an overall basis .

§ The forecasted 2018 occurrence year long term care GL/PL severity is $232,000 per claim limited to

$1 million per occurrence .

Liability and the Long Term Care Profession

Liability is a key concern for the Long Term Care Profession . Providing care for the frailest members of society

is delicate work . Despite a focus on providing quality care and standards of practice, bad outcomes can occur .

These bad outcomes can lead to allegations of negligence and result in litigation . The cost to resolve these

allegations can be quite costly for providers, patients and patients’ families . One tool that can help limit the cost

of reaching a settlement is pre-dispute arbitration agreements .

In this year’s study, we have related liability costs to the Quality Measure published by the Centers for Medicare

and Medicaid Services (CMS) . We expected that facilities with the lowest quality ratings would have the highest

loss rates . Indeed this is the case, but we found that the difference is driven entirely by claim frequency, and the

loss rates for facilities with other Quality Ratings are fairly similar .

By state, West Virginia, Florida and Kentucky continue to have the highest loss rates among the states profiled

in our study, while Massachusetts and Texas are among the states with the lowest loss rates .

2 2017 Long Term Care Actuarial Analysis

Advisory EstimatesThe following table presents a summary of our findings for long term care GL/PL:

LTC Estimates and Annual Trends for Losses Limited to $1 Million per Occurrence

Projected 2018 estimate Annual trend

Overall claim frequency* 1 .05 2 .00%

Indemnity claim frequency* 0 .77 2 .00%

Severity $232,000 4 .00%

Loss rate** $2,450 6 .00%

*number of claims per 100 occupied beds**liability cost per occupied bed

§ Overall claim frequency is the number of claims per 100 occupied beds . Indemnity claim

frequency is the number of claims that resolve with a payment to the claimant per 100 occupied

beds .

§ Claim severity is the average size of claims, with claims limited to $1 million per occurrence .

§ The loss rate is the annual amount per occupied bed required to defend, settle or litigate claims

in a given year .

§ The projected 2018 loss rate is $2,450 and is projected to grow by 6 .0% annually .

State FindingsThe following chart shows projected 2018 loss rate levels for the states that we have profiled in this

study . The 2018 projected loss rates are determined by applying loss trend to our 2017 estimates by

state . The states were profiled based on the volume of data received, the stability of the results

compared to prior years, and the number of providers represented in the data .

Comparison of Projected 2018 Loss Rates Limited to $1 Million per Occurrence

$2,450

100.0%

$3,800

4.1%

$7,190

3.3%

$2,870

4.3%

$3,780

3.9%

$1,300

4.5%

$6,790

4.2%

$520

4.3%

$1,560

3.6%

$2,920

4.1%

$1,010

5.6%

$1,010

4.3%

$2,150

13.7%

$4,000

4.6%

$590

5.1%

$1,280

2.2%

$8,380

2.1%

$1,530

26.2%

Loss Rate

Loss Rates are relative to 2016 occupied beds. The % of Database is measured by occupied beds.

% of Database

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

All Other States

WVVATXTNPAOHNCNJMDMAKYINILGAFLCACountrywide


Countrywide Estimates

Loss RateThe following chart shows the loss rate per

occupied bed .

Loss rates have been increasing since 2010 .

The current annual loss rate trend is

projected to be 6 .0% .

Loss Rate per Occupied Bed Limited to $1M Occurrence

$0

$500

$1,000

$1,500

$2,000

$2,500

20172016201520142013201220112010200920082007

$1,170 $1,150 $1,170

$1,470$1,570 $1,640

$1,750

$2,000$2,100 $2,170

$2,300

Occurrence Year

Claim Frequency per 100 Occupied Beds

0.00

0.20

0.40

0.60

0.80

1.00

1.20

20172016201520142013201220112010200920082007

0.51

0.20

0.71

0.51

0.16

0.67

0.53

0.18

0.71

0.61 0.65

0.22

0.87

0.67 0.70 0.75 0.76 0.74 0.75

1.03

0.20

0.810.25

0.92

0.28

0.98

0.27

1.02

0.28

1.04

0.27

1.01

0.28

Occurrence Year

Expense Only ClaimsIndemnity Claims

Claim FrequencyThe following graph shows the frequency

per 100 occupied beds . The stacked bar

chart provides frequency estimates for claims

with indemnity (indemnity claims) and claims

without indemnity (expense only claims) .

Claim frequency has increased from 0 .67 per

100 occupied beds in 2008 to 1 .03 per 100

occupied beds in 2017 .

The participants in this study represent approximately 211,200 occupied beds in the country . This is approximately 16% of

the beds in the country .


SeverityThe following graph shows the average size

per claim, also called claim severity .

Claim severity has grown over the

experience period from $165,000 in 2007 to

a projected amount of $223,000 in 2017 .

Claim Severity Limited to $1M per Occurrence

$165 $172 $164$180 $181 $179 $179

$195 $202$214 $223

$0

$50

$100

$150

$200

$250

20172016201520142013201220112010200920082007

Occurrence Year

(Th

ou

san

ds)

Liability Costs and Medicaid Reimbursement TrendsMedicaid is a significant source of revenue

for long term care providers .

The following graph shows the per diem

loss rate per bed as a percentage of the

Overall Medicaid per diem reimbursement

rate . The Overall Medicaid reimbursement

rate shown here is a state rate weighted by

the exposure distribution underlying the

per diem loss rate .

Concurrent with the recent loss rate

growth, liability costs as a percent of

the Medicaid Reimbursement rate has

increased in recent years .

Loss Rate as a Percentage of Medical Reimbursement Limited to $1M per Occurrence

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

2016201520142013201220112010200920082007

$153.96

$3.15

$161.71

$3.20

$166.58

$4.02

$171.15

$4.30

$174.00

$4.49

$178.79

$4.79

$181.21

$5.48

$187.07

$5.75

$189.83

$5.94

$194.44

$6.30

Avg. Medicaid per Diem Reimbursement

Per Diem Loss Rate per Bed

2.05% 1.98%

2.41% 2.51% 2.58%2.68%

3.02% 3.07% 3.13% 3.24%

Occurrence Year


Closed claims are presented to show the relationship between indemnity and expense . For this

section, the claims were limited to those that closed within seven years of the occurrence date . This

represents 99% of the claims in each closing year .

The following chart shows the distribution of claims closed with expense only versus claims closed

with indemnity .

The percent of claims closed with indemnity is 70% over the experience period, but only 58% of

claims closed with indemnity in 2016 . The indemnity rate has decreased steadily since 2013 .

Indemnity and Expense Only Claim Counts

The following chart shows the average paid indemnity and expense for claims closed with an

indemnity payment . Indemnity costs are about 76% of total costs on claims closed with indemnity .

The average indemnity has grown since 2009, while the average expense has fluctuated over a fairly

narrow range over this time period .

Claims Closed with Indemnity: Average Size - Unlimited

Indemnity and Expense Statistics

0

500

1,000

1,500

2,000

2,500

201620152014201320122011201020090%

10%

20%

30%

40%

50%

60%

70%

80%

90%

770

0.20

64%

436

1,108

356

76%

947

312

75%

1,329 1,416 1,240 1,349 1,128

58%

398

77%

401

78%

529

70%

761

64%

805

Closed Year

Cla

im C

oun

t

Ind

emn

ity Rate

Expense Only ClaimsIndemnity ClaimsIndemnity Rate

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

20162015201420132012201120102009

146,941

55,671

173,482

64,164

175,019

54,686

210,542 181,855 189,709 227,379 183,629

58,79254,155 57,160

64,528

49,070

Closed YearAvg

Cla

im S

ize

on C

laim

s C

lose

d w

/In

dem

nit

y Average Paid Indemnity Average Paid Expense


The following chart shows the average paid expense for claims closed without an indemnity

payment . The average expense on claims closed without indemnity averages $15,000 . Average

expense on claims closed without indemnity peaked in 2011 and has been declining since then .

Claims Closed without Indemnity: Average Expense - Unlimited

$0

$5,000

$10,000

$15,000

$20,000

$25,000

20162015201420132012201120102009

$11,450

$16,583

$19,944$17,999

$16,658$15,408

$12,938

$10,642

Closed Year

Average Paid Expense


Long term care providers have the opportunity to use claims data for more than insurance purposes .

By using consistent coding to identify the causes of loss, they can make inferences about clinical

practices that impact liability and the quality of patient care .

Using a framework suggested by a participant, Aon solicited claim descriptions using ten specific claim

descriptions . These were:

AAN (Assault/Abuse/Neglect)

Airway/Respiratory

Elopement

Fall with Injury

Injury—Not Fall Related

Medication Variance/ Adverse Drug Reaction

Pressure Ulcer/Wound

Treatment/Procedure— Adverse Outcome

Tube Displacement/Non-airway

Unspecified/Unknown

Causes of Loss

1

2

3

4

5

6

7

8

9

10

Unspecified/Unknown8,173Fall with injury

3,073

Pressure Ulcer/Wound1,509

AAN (Assault/Abuse/Neglect)418

Treatment/Procedure—Adverse Outcome458

All Other772

For participants that could not provide these standard claim descriptions, the existing claim

descriptions were assigned to the standard groupings using the claim descriptions from the loss runs .

The resulting claim distributions are intended to comparatively show the frequency and severity by

cause of loss . Operators that track this coding internally may find a correlation between clinical issues

and causes of loss .

The following chart shows the distribution of closed claim counts by claim description .

The Unspecified/Unknown category reflects that many participants did not provide claim descriptions

or the claim descriptions reflected unknown allegations .

The most common identified claim description is Fall with Injury, which accounts for 49% of claims

with descriptions, and the top four identified claim descriptions accounted for 88% of all identified

claim descriptions .

Injury Type Closed Claim Counts


The following chart shows the distribution of closed claim dollars by claim description . Fall with Injury

claims account for 20% of the total closed claim costs .

Injury Type Closed Claim Dollars (in millions)

The average size of a closed claim varies by claim type . Pressure Ulcer/ Wound claims have the highest

average claim cost . Within the All Other category, only Elopement had a higher per claim cost, at

about $262,000, but the incidence of Elopement was extremely low with only 34 claims out of the

total 6,230 claims with coded claim descriptions .

Closed Claim Average Claim Size

Unspecified/Unknown$1,084Fall with injury

$473

Pressure Ulcer/Wound$383

AAN (Assault/Abuse/Neglect)$67

Treatment/Procedure—Adverse Outcome$76

All Other$130

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

All Oth

er

Treatm

ent/P

roce

dure—

Adverse

Outco

me

AAN (Assa

ult/

Abuse/N

eglec

t)

Pressu

re

Ulcer/W

ound

Fall w

ith In

jury

Unspec

ified/

Unknown

$133,000$154,000

$254,000

$161,000 $165,000 $168,000


The use of arbitration by Long Term Care providers has been controversial . Opponents of arbitration

argue that the agreements restrict access to courts, give providers unfair leverage and are not

clearly presented or properly executed when residents are accepted to the facility . Proponents of

arbitration see arbitration as a faster, lower cost path to resolve claims with comparable results .

We have studied arbitration use in long term care facilities since 2008 . Each year, we ask providers

to code closed claims by whether the claim was subject to an arbitration agreement or not . The

arbitration category includes claims where an arbitration agreement was in place and never

challenged (ADR) and claims where an arbitration agreement was challenged and upheld (Upheld

ADR) . The non-arbitration category includes claims where no arbitration agreement was ever

in use (No ADR) and claims where an arbitration agreement was challenged and found invalid

(Invalid ADR) .

Our arbitration database consists of 2,535 closed claims with coding related to applicability of

arbitration (ADR) . These claims were closed between 2004 and 2017 and are related to occurrences

between 2003 and 2016 . Closed claims are from 37 states, with concentrations in California,

Georgia, Indiana, Kentucky, Massachusetts, North Carolina, Tennessee and Texas .

It is important to recognize that claims in the arbitration category are most often resolved before

formal mediation or arbitration proceedings .

The review concludes:

§ The total cost for claims resolved with arbitration agreements in place is 5% lower than for claims

resolved without arbitration agreements in place .

§ The time to settlement for claims resolved with arbitration agreements in place is three months

faster than for claims resolved without arbitration agreements in place .

§ Claims subject to ADR agreements were challenged 30% of the time .

§ Claims involving challenges to the ADR agreement have three times the average total cost of

other claims and take longer to settle .

§ Claims involving unchallenged ADR agreements have higher total costs compared to claims

settled without ADR agreements in place . This difference is driven by higher average indemnity

for claims settled under unchallenged ADR agreements .

Arbitration


Distribution of Closed Claim Counts

The following table presents the closed claim count distribution, grouped by indemnity amount .

From the population of closed claims, 62% were resolved without arbitration agreements in place,

and the remaining 38% were resolved with arbitration agreements in place .

Distribution of Closed Claim Counts

Indemnity Amount Arbitration Non-Arbitration

No Payment 280 27 .4% 333 22 .0%

$1 to $25,000 127 12 .4% 351 23 .2%

$25,000 to $250,000 484 47 .3% 602 39 .8%

$250,000 to $1,000,000 120 11 .7% 194 12 .8%

Greater than $1,000,000 12 1 .2% 32 2 .1%

Total 1,023 100.0% 1,512 100.0%

Claims with Payment 743 72 .6% 1,179 78 .0%

Claim Costs

From our sample, the average total cost of an outcome subject to an arbitration agreement is

$193,000, while the average cost of a non-arbitrated outcome is $203,000, making arbitrated

outcomes 5% less costly .

Average Claim Cost

Indemnity Amount Arbitration Non-Arbitration Total

Average Indemnity $137,000 $143,000 $141,000

Average Expense $56,000 $60,000 $58,000

Total $193,000 $203,000 $199,000

Number of Claims 1,023 1,512 2,535


Claim Costs for Unchallenged Outcomes

Unchallenged outcomes are resolutions where ADR was not disputed, or where ADR was never implemented .

For these claim types, the average total claim cost for ADR is higher than the claim cost without ADR . Average

expense is nearly the same between categories and average indemnity is higher for ADR .

Average Total Claim Costs—Unchallenged Outcomes



Average Expense $45,000 $44,000 $44,000

Total $170,000 $139,000 $151,000

Number of Claims 849 1,306 2,155

Claim Costs for Challenged Outcomes

Challenged outcomes are resolutions where ADR initially applied, but was challenged and upheld

(Arbitration), or challenged and found invalid (Non-Arbitration) . Claims in this category have much higher

average total costs . The average indemnity and expense for challenged Arbitration outcomes are $308,000

on average and are nearly double the average costs of $170,000 for unchallenged Arbitration outcomes . The

average indemnity and expense for challenged Non-Arbitration outcomes is $614,000, which is more than

four times the average costs of $139,000 for unchallenged Non-Arbitration outcomes .

Average Total Claim Costs—Challenged Outcomes



Average Expense $110,000 $163,000 $138,000

Total $308,000 $614,000 $473,000

Number of Claims 174 206 380

Challenge Rates

Of the total 2,535 claims, 1,229 claims had an ADR agreement in place when the claim was initiated . Of

those initial claims, 380, or 31%, were challenged . Of the challenged claims, 174, or about 45%, were

upheld . The remaining 206 were unenforceable . As noted above, the challenged claims were associated

with higher overall costs .

Challenge Rates by Category

Category Counts Percent of ADR Claims

Claims with ADR Agreements 1,229 100%

Challenged 380 31%

Upheld 174 14%


Time to Settlement

In the following table, we have sorted the closed claims by the year the claim closed and calculated

the average age of the closed claim .

All Claims

Closure Year Arbitration Non-Arbitration

Avg Months Claim Count Avg Months Claim Count Difference in Months

2004 10 .2 9 12 .0 38 1 .8

2005 11 .9 43 17 .2 124 5 .4

2006 19 .1 57 21 .0 138 1 .9

2007 22 .3 69 25 .3 120 3 .0

2008 23 .7 84 28 .7 91 5 .0

2009 27 .0 107 30 .3 138 3 .2

2010 29 .1 92 31 .1 104 2 .0

2011 30 .0 82 29 .8 112 -0 .1

2012 34 .8 87 37 .7 147 2 .8

2013 34 .6 87 33 .7 134 -0 .8

2014 31 .5 97 35 .3 138 3 .8

2015 35 .1 75 42 .6 76 7 .5

2016 37 .6 97 35 .5 91 -2 .1

2017 46 .1 37 47 .8 61 1 .7

All Years Combined 28.7 1,023 31.2 1,512 2.5

Unchallenged Outcomes 26 .3 849 29 .2 1,306 2 .9

Challenged Outcomes 42 .3 174 42 .1 206 -0 .2

Difference 16 .0 12 .9 -3 .1

All Year Avg Days Weighted by total claim count to normalize claims distribution

In eleven of the fourteen closure years shown, settlements subject to ADR agreements close more

quickly . When considered in total, ADR agreements reduce the time to claim resolution by nearly

three months .

This time to settlement advantage for ADR is greater for unchallenged outcomes, while, for

challenged outcomes, the time to settlement is nearly the same . The challenge process adds

thirteen to sixteen months to the time to settlement when compared with unchallenged

settlements .


The Centers for Medicare and Medicaid Services (CMS) produces ratings for nursing homes based

on Health Inspections, Staffing and Quality Measures . The Overall rating is primarily reflective of the

Health Inspections results, with modifications for Staffing and Quality Measures results . A facility’s

rating can change over time as inspection results are refreshed . The system has been adjusted

several times since it was introduced, with the latest adjustment occurring in July 2016 .

CMS makes the ratings and the detail available online, with monthly updates . The ratings are

intended to help consumers make informed decisions when selecting a Long Term Care provider .

The databases have also been used by plaintiffs attorneys to publicize inspection deficiencies in an

attempt to solicit clients .1

For 40% of the overall Long Term Care database, claims and exposures were coded to CMS

Medicare provider number . Using the provider number, we mapped the Overall rating as of April

2017 to providers and aggregated the experience . As noted above, the current rating may be

different from the rating a facility has had in the past . Therefore, recent year estimates of loss rates,

severity and frequency are more indicative of differences in experience by rating . The following

table shows the distribution of exposures by rating .

Distribution of Beds by Five-Star Rating

Rating

One Star Two Stars Three Stars Four Stars Five Stars Total

Occupied Bed Count

19,793 20,732 18,828 23,733 14,335 97,220

In our first review of liability by CMS Five-Star Quality Rating we found:

1 . The loss rate for facilities with a one-star rating tends to be higher than facilities with other ratings .

2 . The average size of claims is similar regardless of rating .

3 . Facilities with a one-star rating have a higher frequency of claims than facilities with other ratings .

CMS Five Star Ratings

1 http://caselaw.findlaw.com/ga-supreme-court/1755027.html


Loss Rates by Rating

The following chart shows the loss rates by year since 2012 by CMS Five-Star Quality Rating as of

April 2017 .

Loss Rate per Occupied Bed Limited to $1M per Occurrence

Based the recent year results, one star rated facilities have a higher loss rate than facilities with other

star ratings .

$0 $500 $1,000 $1,500 $2,000 $2,500 $3,000

2017

2016

2015

2014

2013

2012

$1,550

$1,750

$2,080

$1,830

$2,180

$1,500

$1,990

$1,820

$1,750

$1,550$1,710

$1,600

$2,050

$2,430

$2,220$2,290

$2,220$2,160

$2,340

$2,210$2,080$2,100

$2,160

$2,480

$2,350$2,210$2,230$2,290

$1,790

$2,030

Occ

urr

ence

Yea

r

1 Star 2 Star 3 Star 4 Star 5 Star


Claim Frequency by Rating

The following graph shows claim frequency by CMS Five-Star Quality Rating .


The graph shows that claims frequency varies by year and rating, but one star rated facilities tend to

have higher frequency than other facilities .

0.00 0.20 0.40 0.60 0.80 1.00 1.20 1.40 1.60

2017

2016

2015

2014

2013

2012

1.00

1.04

1.21

1.10

1.33

1.03

1.021.11

1.07

1.041.04

1.15

1.22

1.39

1.191.31

1.211.32

1.271.141.16

1.10

1.18

1.301.16

1.191.12

1.20

1.10

1.19

Occ

urr

ence

Yea

r



Claim Severity by Rating

The following graph shows claim severity by CMS Five-Star Quality Rating .

Severity per Claim Limited to $1M per Occurrence

The graph shows that claim severity is fairly consistent among facilities, regardless of rating .

0 50,000 100,000 150,000 200,000 250,000

2017

2016

2015

2014

2013

2012

156,000

168,000

172,000

166,000

163,000

146,000

195,000

163,000

164,000

149,000164,000

139,000

168,000

175,000

186,000175,000

183,000163,000

184,000194,000

179,000190,000

183,000

191,000

202,000186,000

198,000190,000

163,000

170,000

Occ

urr

ence

Yea

r



California

Loss RateLoss rates have increased to a level above

$2,200 since 2012 .

FrequencyClaims frequency is fairly flat since 2010 .


The participants in this study represent approximately 9,100 occupied beds in the state . This is approximately 9% of

the total beds in state .


$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

20172016201520142013201220112010200920082007

$1,720 $1,650 $1,750

$2,160

$1,280

$2,270$2,570

$2,860$3,140

$3,380$3,590

Occurrence Year

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

20172016201520142013201220112010200920082007

0.71

0.46

1.17

0.77

0.31

1.08

0.69

0.24

0.93

0.79 0.61

0.32

0.93

0.81 0.67 0.70 0.69 0.71 0.73

1.08

0.29

1.08

0.31

1.12

0.39

1.06

0.32

1.02

0.33

1.02

0.35

1.06

0.35

Occurrence Year



Severity In 2013, claim severity began an increase

that continues .

Liability Costs and Medicaid Reimbursement TrendsThe loss rate as a percentage of the

Medicaid Reimbursement Rate has grown

to just under 5% .


Loss Rate as a Percentage of Medicaid Reimbursement Limited to $1M Per Occurrence

$147 $153

$189 $200

$137

$202

$242

$279$307 $320

$333

$0

$50

$100

$150

$200

$250

$300

$350

20172016201520142013201220112010200920082007

Occurrence Year

(Th

ou

san

ds)

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

2016201520142013201220112010200920082007

$150.69

$4.52

$156.56

$4.79

$163.40

$5.91

$168.05

$3.50

$175.24

$6.21

$179.14

$7.04

$178.61

$7.83

$186.24

$8.60

$191.33

$9.25

$199.87

$9.83



3.00% 3.06%

3.62%

2.08%

3.54%3.93%

4.38%4.62%

4.83% 4.92%

Occurrence Year


Florida

Loss RateFlorida loss rates have been increasing since

2007, with a projected 2017 loss rate at

$6,780 per occupied bed .

The sharp increase since 2011 is attributable

to rising claims frequency .

Florida’s loss rate is the second highest

among the profiled states and is noteworthy

because of the elevated frequency of claims .

FrequencyFlorida’s frequency is the second highest

of the profiled states at 2 .60 claims per 100

occupied beds .

Frequency has been elevated since 2011 .


The participants in this study represent approximately 7,100 occupied beds in the state . This is approximately 10% of the

total beds in state .


0.00

0.50

1.00

1.50

2.00

2.50

3.00

20172016201520142013201220112010200920082007

1.39

0.201.59

1.42

0.191.61

1.51

0.34

1.85

1.42 1.81

0.54

2.35

1.75 1.55 1.87 1.84 1.77 1.81

2.60

0.171.59

0.68

2.43

1.00

2.55

0.63

2.50

0.75

2.59

0.78

2.55

0.79

Occurrence Year


$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

20172016201520142013201220112010200920082007

$3,420$2,910

$3,520 $3,570

$4,570 $4,380$4,060

$5,180

$6,480 $6,400$6,780

Occurrence Year


Severity Florida’s claim severity has increased to over

$200,000 since 2014 .

Liability Costs and Medicaid Reimbursement TrendsThe liability costs as a percent of the

Medicaid Reimbursement Rate is 8 .27%,

and is the third highest among the

profiled states .



0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

2016201520142013201220112010200920082007

$175.00

$7.97

$180.05

$9.64

$202.66

$9.77

$206.47

$12.51

$205.61

$11.99

$211.98

$11.12

$211.98

$14.18

$225.14

$17.74

$225.14

$17.52

$224.47

$18.56



4.55%

5.35%4.82%

6.06% 5.83%5.25%

6.69%

7.88% 7.78%8.27%

Occurrence Year

$215

$181 $190

$225

$194$180

$159

$207

$250 $251 $261

$0

$50

$100

$150

$200

$250

$300

20172016201520142013201220112010200920082007

Occurrence Year

(Th

ou

san

ds)


Georgia

Loss RateGeorgia’s loss rate surged in 2010 and

peaked in 2012 . The loss rate has been stable

since 2014 .

The sharp increase in 2010 may be related

to the removal of the $350,000 cap on

non-economic damages .

FrequencyClaim frequency in Georgia spiked in 2010

coincident with the Georgia Supreme Court’s

ruling striking down the $350,000 cap on

non-economic damages .

Frequency has been fairly level since 2012 .


The participants in this study represent approximately 9,200 occupied beds in the state . This is approximately 28%

of the total beds in state .


0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

20172016201520142013201220112010200920082007

0.45

0.090.54

0.53

0.130.66

0.60

0.22

0.82

0.93 0.71

0.23

0.94

0.94 0.88 0.93 0.89 0.91 0.93

1.31

0.31

1.24

0.33

1.27

0.47

1.35

0.36

1.29

0.35

1.24

0.38

1.29

0.38

Occurrence Year


$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

20172016201520142013201220112010200920082007

$850$1,070 $1,030

$2,550

$1,940

$3,720

$3,130

$2,610 $2,520 $2,550$2,700

Occurrence Year


Severity Claim severity in Georgia also increased

in 2010, around the time of the Georgia

Supreme Court ruling, which struck down

the $350,000 cap on non-economic

damages .

The severity in 2012 is influenced by

five claims with incurred values over

$1,000,000 .

The severity has been stable around

$200,000 .

Liability Costs and Medicaid Reimbursement TrendsGeorgia’s loss rates relative to the

Medicaid Per Diem Reimbursement rate is

substantially higher than levels pre-2009 .



0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

2016201520142013201220112010200920082007

$127.43

$2.93

$133.48

$2.82

$135.22

$6.98

$141.78

$5.31

$141.59

$10.18

$146.90

$8.57

$156.10

$7.15

$159.11

$6.90

$164.02

$6.98

$166.86

$7.39



2.30% 2.11%

5.16%

3.75%

7.19%

5.83%

4.58% 4.34% 4.26% 4.43%

Occurrence Year

$157 $161

$126

$205 $206

$292

$232$203 $203 $198 $206

$0

$50

$100

$150

$200

$250

$300

$350

20172016201520142013201220112010200920082007

Occurrence Year

(Th

ou

san

ds)


Illinois

Loss RateThe loss rate in Illinois has been increasing

moderately since 2008 .

Compared to last year’s results, the loss rates

are higher due the inclusion of a new large

participant and higher overall frequency

estimates .

FrequencyClaim frequency in Illinois is the highest

among the states profiled in this report .

The claims frequency has been higher than

historical levels since 2011 .

The overall indemnification rate for Illinois is

96%, which is substantially higher than the

countrywide average of 73% .





0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

20172016201520142013201220112010200920082007

1.28

0.111.39

1.13

0.161.29

1.36

0.281.64

1.65 1.99

0.162.15

1.88 2.57 2.82 2.47 2.62 2.67

2.78

0.111.76 0.09

1.97

0.042.61 0.14

2.96

0.122.59 0.11

2.730.11

Occurrence Year


$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

$4,500

20172016201520142013201220112010200920082007

$2,980

$2,510 $2,490

$2,930

$3,570$3,200

$3,990 $3,940

$3,410 $3,360$3,560

Occurrence Year


Severity Severity has been decreasing since 2011 and

is currently at $128,000 .

Severity results are consistent with last

year’s estimates .

Liability Costs and Medicaid Reimbursement TrendsIllinois’ loss rate relative to the Medicaid Per

Diem Reimbursement rate is above 6% .



0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

2016201520142013201220112010200920082007

$103.89

$6.87

$112.20

$6.82

$117.29

$8.02

$117.88

$9.77

$130.47

$8.76

$135.28

$10.92

$129.30

$10.79

$148.69

$9.34

$145.99

$9.20

$151.99

$9.75



6.61%6.08%

6.84%

8.29%

6.71%

8.07% 8.34%

6.28% 6.30% 6.41%

Occurrence Year

$214$194

$152$167 $166 $162

$153$133 $132

$123 $128

$0

$50

$100

$150

$200

$250

20172016201520142013201220112010200920082007

Occurrence Year

(Th

ou

san

ds)


Indiana

Loss RateIndiana’s loss rates have increased since 2012 .

FrequencySince 2012, claim frequency has been near

the current level of 0 .78 claims per 100

occupied beds .





0.00

0.20

0.40

0.60

0.80

1.00

1.20

20172016201520142013201220112010200920082007

0.31

0.13

0.44

0.29

0.18

0.47

0.28

0.10

0.38

0.51 0.46

0.18

0.64

0.58 0.46 0.62 0.76 0.62 0.63

0.78

0.17

0.680.15

0.73

0.08

0.54

0.17

0.79 0.21

0.97

0.15

0.77

0.15

Occurrence Year


$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

20172016201520142013201220112010200920082007

$450$340 $380

$570$520

$800$750

$1,060$1,140 $1,160

$1,230

Occurrence Year


Severity Claim severity increased sharply in 2012 and

has remained elevated .

Liability Costs and Medicaid Reimbursement TrendsThe loss rate as a percent of the Medicaid

Reimbursement Rate has increased from a

low of 0 .70% in 2007 to 1 .82% in 2016 .



0.00%

0.20%

0.40%

0.60%

0.80%

1.00%

1.20%

1.40%

1.60%

1.80%

2.00%

2016201520142013201220112010200920082007

$132.94

$0.93

$148.57

$1.04

$151.69

$1.56

$153.79

$1.42

$158.25

$2.19

$163.95

$2.05

$168.87

$2.90

$173.76

$3.12

$179.32

$3.18

$185.60

$3.37



0.70% 0.70%

1.03%0.92%

1.38%1.25%

1.72%1.80% 1.77% 1.82%

Occurrence Year

$103

$73

$100

$83 $80

$110

$139 $134

$118

$151 $157

$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

20172016201520142013201220112010200920082007

Occurrence Year

(Th

ou

san

ds)


Kentucky

Loss RateKentucky has the third highest loss rate of the

profiled states in this study .

The loss rate has increased from $1,480 in

2007 to a projected $6,410 in 2017 .

FrequencyClaim frequency in Kentucky is the fourth

highest among the profiled states .

Frequency has increased from a low of

0 .74 claims per occupied bed in 2007

to a projected 1 .90 claims per occupied

bed in 2017 .





0.00

0.50

1.00

1.50

2.00

2.50

20172016201520142013201220112010200920082007

0.52

0.22

0.74

0.77

0.22

0.99

0.83

0.140.97

1.38 1.50

0.37

1.87

1.38 1.13 1.66 1.52 1.36 1.38

1.90

0.23

1.610.42

1.80

0.65

1.78 0.50

2.16

0.52

2.04

0.50

1.86

0.52

Occurrence Year


$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

20172016201520142013201220112010200920082007

$1,480

$3,020$3,330

$5,130

$5,870$5,410

$4,870

$6,300 $6,370$6,040

$6,410

Occurrence Year


Severity Claim severity in Kentucky is the second

highest of the states profiled in this study

and has been above $270,000 per claim

since 2008 .

Liability Costs and Medicaid Reimbursement TrendsThe loss rate as a percentage of the per

diem Medicaid Reimbursement rate is

9 .88% in 2016 .

This is the highest level among the profiled

states .



0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

2016201520142013201220112010200920082007

$132.72

$8.27

$137.49

$9.12

$142.72

$14.05

$147.14

$16.07

$151.41

$14.81

$156.86

$13.33

$161.57

$17.25

$166.25

$17.44

$171.57

$16.54

$177.58

$17.55



6.23%6.63%

9.84%

10.92%

9.78%

8.50%

10.68% 10.49%9.64% 9.88%

Occurrence Year

$200

$304

$342$319 $314 $301

$274$291

$312 $324 $337

$0

$50

$100

$150

$200

$250

$300

$350

$400

20172016201520142013201220112010200920082007

Occurrence Year

(Th

ou

san

ds)


Maryland

Loss RateThe loss rates in Maryland increased sharply

in 2013 and remained above $1,240 since .

FrequencyClaim frequency in Maryland has been

volatile, but is currently 0 .66 claims per 100

occupied beds .





0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

0.90

20172016201520142013201220112010200920082007

0.54

0.19

0.73

0.53

0.040.57

0.55

0.10

0.65

0.46 0.50

0.16

0.66

0.41 0.70 0.64 0.50 0.57 0.58

0.66

0.12

0.58

0.030.44

0.10

0.80

0.11

0.75

0.09

0.59 0.08

0.650.08

Occurrence Year


$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

20172016201520142013201220112010200920082007

$950 $950

$1,140$1,000 $990

$680

$1,600$1,450

$1,240$1,380

$1,470

Occurrence Year


Severity Claim severity in Maryland increased sharply

in 2013 and has grown to over $200,000 .


Reimbursement Rate is 1 .64% .



0.00%

0.20%

0.40%

0.60%

0.80%

1.00%

1.20%

1.40%

1.60%

1.80%

2.00%

2016201520142013201220112010200920082007

$194.10

$2.60

$213.27

$3.12

$212.29

$2.74

$222.47

$2.71

$231.81

$1.86

$239.63

$4.38

$237.86

$3.97

$245.80

$3.39

$239.37

$3.78

$245.39

$4.02



1.34%1.46%

1.29% 1.22%

0.80%

1.83%1.67%

1.38%

1.58% 1.64%

Occurrence Year

$131

$166$176 $174

$150 $154

$199 $192$212 $214

$223

$0

$50

$100

$150

$200

$250

20172016201520142013201220112010200920082007

Occurrence Year

(Th

ou

san

ds)


Massachusetts

Loss RateThe loss rate in Massachusetts has been near

$500 per occupied bed since 2009 .

Massachusetts has a $500,000 per occurrence

limit on non-economic damages and

limitations on plaintiff’s attorneys’ fees . These

may contribute to the stable environment,

low claims incidence and low severity .

FrequencyClaim frequency in Massachusetts has been

stable over the experience period and is

currently at 0 .34 per 100 occupied beds, the

lowest frequency among the profiled states .





0.00

0.10

0.20

0.30

0.40

0.50

0.60

20172016201520142013201220112010200920082007

0.29

0.21

0.50

0.24

0.11

0.35

0.23

0.08

0.31

0.23 0.24

0.10

0.34

0.24 0.22 0.24 0.25 0.23 0.23

0.34

0.14

0.37

0.10

0.34

0.10

0.320.12

0.36

0.10

0.35

0.10

0.33

0.11

Occurrence Year


$0

$100

$200

$300

$400

$500

$600

$700

20172016201520142013201220112010200920082007

$590

$490 $500

$410

$550$490

$370 $370

$470 $460$490

Occurrence Year


Severity Claim severity in Massachusetts has been

under $165,000 for the entire experience

period .

The projected severity in 2017 is $145,000 .


Reimbursement Rate has been declining

over the experience period and, at 0 .66%,

is the lowest of the profiled states .



0.00%

0.10%

0.20%

0.30%

0.40%

0.50%

0.60%

0.70%

0.80%

0.90%

2016201520142013201220112010200920082007

$191.30

$1.34

$191.30

$1.37

$192.84

$1.12

$196.84

$1.51

$197.40

$1.34

$197.39

$1.01

$197.91

$1.01

$197.97

$1.29

$201.44

$1.26

$202.98

$1.34



0.70% 0.72%

0.58%

0.77%

0.68%

0.51% 0.51%

0.65% 0.63% 0.66%

Occurrence Year

$117

$140

$164

$111

$164

$144

$115$105

$134 $139$145

$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

20172016201520142013201220112010200920082007

Occurrence Year

(Th

ou

san

ds)


New Jersey

Loss RateThe loss rate per occupied bed in New Jersey

has been generally between $2,410 and

$2,810 since 2013 .

FrequencyThe frequency per 100 occupied beds has

been fairly level between 1 .12 and 1 .36 since

2009 .





0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

20172016201520142013201220112010200920082007

0.70

0.66

1.36

0.68

0.28

0.96

0.71

0.41

1.12

0.85 0.98

0.29

1.27

0.70 1.20 1.01 0.92 0.95 0.97

1.29

0.31

1.16

0.42

1.120.16

1.36

0.33

1.34

0.30

1.22

0.31

1.26

0.32

Occurrence Year


$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

20172016201520142013201220112010200920082007

$1,410$1,150

$1,630

$2,100 $2,210

$1,330

$2,570$2,810

$2,410$2,590

$2,740

Occurrence Year


Severity Claim severity has increased over time and

has exceeded $200,000 in recent years .


reimbursement rate is at 3 .60% .



0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

4.00%

2016201520142013201220112010200920082007

$187.17

$3.15

$204.96

$4.46

$204.96

$5.75

$207.76

$6.05

$203.13

$3.64

$200.96

$7.04

$203.85

$7.69

$206.38

$6.60

$207.35

$7.09

$208.36

$7.50



1.68%

2.18%

2.81% 2.91%

1.79%

3.50%3.77%

3.20%3.42%

3.60%

Occurrence Year

$103$120

$146

$181 $174

$118

$188$209

$198 $205$213

$0

$50

$100

$150

$200

$250

20172016201520142013201220112010200920082007

Occurrence Year

(Th

ou

san

ds)


North Carolina

Loss RateThe loss rate in North Carolina has been

stable since 2013 .

The projected loss rate per occupied bed is

expected to reach $950 in 2017 .

A $500,000 non-economic damages cap

became effective October 1, 2011 .

FrequencyThe frequency increase in 2010 may be

related to claims presented before the

implementation of tort reform effective

October 1, 2011 . Claim frequency subsided

for a time, but is currently at 0 .56 claims per

100 occupied beds .





0.00

0.10

0.20

0.30

0.40

0.50

0.60

20172016201520142013201220112010200920082007

0.41

0.07

0.48

0.34

0.09

0.43

0.37

0.06

0.43

0.45 0.35

0.09

0.44

0.38 0.34 0.44 0.43 0.43 0.44

0.56

0.09

0.54

0.09

0.47

0.12

0.46 0.12

0.56

0.12

0.55

0.12

0.55

0.12

Occurrence Year


$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

20172016201520142013201220112010200920082007

$1,180

$550 $540

$900

$510$600

$880 $900 $890 $900 $950

Occurrence Year


Severity Claim severity has been in around $165,000

in recent years .

The claim severity spike in 2007 reflects

several claims that exceed $1 million .


reimbursement rate is at 1 .34% .



0.00%

0.20%

0.40%

0.60%

0.80%

1.00%

1.20%

1.40%

1.60%

1.80%

2016201520142013201220112010200920082007

$136.54

$1.51

$150.33

$1.48

$155.69

$2.46

$160.52

$1.40

$165.17

$1.64

$171.12

$2.41

$176.25

$2.46

$181.36

$2.44

$187.17

$2.46

$193.72

$2.60



1.11%0.98%

1.58%

0.87%0.99%

1.41% 1.40% 1.35% 1.31% 1.34%

Occurrence Year

$247

$128 $124

$165

$117$128

$192

$162 $162 $163 $170

$0

$50

$100

$150

$200

$250

$300

20172016201520142013201220112010200920082007

Occurrence Year

(Th

ou

san

ds)


Ohio

Loss RateLoss rates in Ohio have grown from a low

point of $390 per occupied bed in 2007 to a

projected $960 per occupied bed in 2017 .

FrequencyClaim frequency in Ohio has grown over

the experience period and is currently at

0 .60 claim per 100 occupied beds .





0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

20172016201520142013201220112010200920082007

0.35

0.16

0.51

0.44

0.13

0.57

0.25

0.21

0.46

0.31 0.32

0.20

0.52

0.34 0.41 0.35 0.37 0.37 0.38

0.60

0.15

0.460.23

0.57

0.21

0.62

0.21

0.56

0.22

0.59

0.22

0.59

0.22

Occurrence Year


$0

$200

$400

$600

$800

$1,000

$1,200

20172016201520142013201220112010200920082007

$390

$670

$490$550 $560 $570

$880

$750$800

$900$960

Occurrence Year


Severity Claim severity has grown steadily over the

experience period and is projected to be

$160,000 in 2017 .


reimbursement rate is around 1 .49% .



0.00%

0.20%

0.40%

0.60%

0.80%

1.00%

1.20%

1.40%

1.60%

2016201520142013201220112010200920082007

$163.96

$1.83

$166.07

$1.34

$172.16

$1.51

$177.77

$1.53

$172.33

$1.56

$170.63

$2.41

$174.64

$2.05

$173.97

$2.19

$175.10

$2.46

$175.94

$2.63



1.12%

0.81%0.88% 0.86% 0.91%

1.41%

1.17%1.26%

1.40%1.49%

Occurrence Year

$78

$118$106

$118$108

$99

$142$135 $136

$154 $160

$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

20172016201520142013201220112010200920082007

Occurrence Year

(Th

ou

san

ds)


Pennsylvania

Loss RateThe 2017 projected loss rate in Pennsylvania

is $2,030 per occupied bed .

FrequencyThe frequency of claims has increased

from a low of 0 .45 in 2007 to a projected

1 .00 in 2017 .





0.00

0.20

0.40

0.60

0.80

1.00

1.20

20172016201520142013201220112010200920082007

0.33

0.12

0.45

0.39

0.15

0.54

0.45

0.14

0.59

0.53 0.65

0.23

0.88

0.59 0.67 0.76 0.77 0.71 0.73

1.00

0.22

0.75

0.20

0.79 0.29

0.96

0.29

1.05

0.28

1.05

0.27

0.98

0.27

Occurrence Year


$0

$500

$1000

$1500

$2000

$2500

20172016201520142013201220112010200920082007

$610$780

$920

$1,280

$1,670

$1,400

$1,910$2,040

$1,890 $1,910$2,030

Occurrence Year


Severity Since 2011, claim severity has been at or

above $178,000 .

Liability Costs and Medicaid Reimbursement TrendsThe liability cost as a percent of Medicaid per

diem rate is currently at 2 .56% .



0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

2016201520142013201220112010200920082007

$190.83

$2.14

$197.61

$2.52

$199.42

$3.50

$203.54

$4.57

$204.63

$3.83

$207.61

$5.23

$209.65

$5.59

$216.15

$5.17

$216.75

$5.23

$216.79

$5.56



1.12%1.28%

1.76%

2.25%

1.87%

2.52%2.67%

2.39% 2.41%2.56%

Occurrence Year

$136$145 $154

$169$190

$178$198 $194

$180$195 $203

$0

$50

$100

$150

$200

$250

20172016201520142013201220112010200920082007

Occurrence Year

(Th

ou

san

ds)


Tennessee

Loss RateThe loss rate in Tennessee has grown from a

low in 2009 of $1,190 per occupied bed to a

projected $3,770 per occupied bed in 2017 .

Tennessee enacted limits on non-economic

damages effective October 1, 2011 . The

enacted cap on noneconomic damages was

$750,000 for most allegations . This cap is higher

than the caps implemented in other states .

FrequencyClaim frequency has increased since 2008

and has been level since 2015 .





0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

20172016201520142013201220112010200920082007

0.71

0.17

0.88

0.44

0.16

0.60

0.54

0.15

0.69

0.57 0.85

0.18

1.03

0.80 0.97 1.00 1.10 1.05 1.08

1.35

0.22

0.790.28

1.080.17

1.140.27

1.270.28

1.38

0.28

1.33

0.27

Occurrence Year


$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

20172016201520142013201220112010200920082007

$1,980

$1,260 $1,190$1,300

$2,130$2,030

$2,590

$2,970

$3,400$3,550

$3,770

Occurrence Year


Severity Claim severity has increased since 2010

and is the fourth highest severity of the

profiled states .


per diem reimbursement has increased from

a low of 2 .30% in 2008 to 5 .75% in 2016 .



0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

2016201520142013201220112010200920082007

$136.12

$3.45

$141.56

$3.26

$144.30

$3.56

$148.77

$5.83

$153.09

$5.56

$158.60

$7.09

$163.36

$8.13

$168.09

$9.31

$173.47

$9.72

$179.54

$10.32



2.53% 2.30% 2.47%

3.92%3.63%

4.47%4.98%

5.54% 5.60% 5.75%

Occurrence Year

$224$210

$172 $165

$206$188

$227 $233$247

$268$279

$0

$50

$100

$150

$200

$250

$300

20172016201520142013201220112010200920082007

Occurrence Year

(Th

ou

san

ds)


Texas

Loss RateThe loss rate in Texas has been growing since

2010 .

The increases are related to severity growth .

FrequencyThe claim frequency in Texas is generally

around 0 .60 per 100 occupied beds since

2013 .





0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

20172016201520142013201220112010200920082007

0.36

0.29

0.65

0.26

0.18

0.44

0.26

0.28

0.54

0.22 0.20

0.23

0.43

0.24 0.34 0.29 0.29 0.30 0.31

0.62

0.36

0.58

0.27

0.51

0.26

0.60

0.31

0.60

0.29

0.58

0.31

0.61

0.31

Occurrence Year


$0

$100

$200

$300

$400

$500

$600

$700

20172016201520142013201220112010200920082007

$440

$290 $270$220

$270

$340

$530

$650

$540 $520$550

Occurrence Year


Severity Claim severity in Texas is currently just

under $90,000 .

Despite growth over time, Texas has the

lowest severity of the profiled states .


per diem reimbursement rate has grown

from a low of 0 .49% in 2009 to 1 .03% in

2016 . Texas has the second lowest rate

among the profiled states .



0.00%

0.20%

0.40%

0.60%

0.80%

1.00%

1.20%

1.40%

1.60%

2016201520142013201220112010200920082007

$106.48

$0.79

$111.89

$0.74

$123.20

$0.60

$128.09

$0.74

$126.87

$0.93

$129.98

$1.45

$131.61

$1.78

$135.43

$1.48

$141.64

$1.42

$146.60

$1.51



0.74%0.66%

0.49%0.58%

0.73%

1.12%

1.35%

1.09%1.00% 1.03%

Occurrence Year

$68 $67

$50

$38

$64 $67

$87

$107

$93$86 $89

$0

$20

$40

$60

$80

$100

$120

20172016201520142013201220112010200920082007

Occurrence Year

(Th

ou

san

ds)


Virginia

Loss RateThe loss rate in Virginia is volatile over the

experience period .

FrequencyFrequency is around 0 .50 claims per 100

occupied beds for much of the experience

period .





0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

20172016201520142013201220112010200920082007

0.53

0.22

0.75

0.37

0.18

0.55

0.39

0.28

0.67

0.30 0.26

0.34

0.60

0.36 0.20 0.30 0.33 0.31 0.32

0.53

0.17

0.470.18

0.54

0.15

0.350.23

0.53

0.25

0.58

0.21

0.52

0.21

Occurrence Year


$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

20172016201520142013201220112010200920082007

$1,450

$760$850

$570 $550

$890

$370

$820

$1,100 $1,140$1,210

Occurrence Year


Severity Severity in Virginia has been volatile, but has

grown to $227,000 .


reimbursement rate is currently 1 .87% .



0.00%

0.20%

0.40%

0.60%

0.80%

1.00%

1.20%

1.40%

1.60%

1.80%

2.00%

2016201520142013201220112010200920082007

$137.72

$2.08

$143.17

$2.33

$148.73

$1.56

$152.43

$1.51

$153.43

$2.44

$157.38

$1.01

$160.09

$2.25

$168.30

$3.01

$173.81

$3.12

$177.40

$3.31



1.511.63%

1.05%0.99%

1.59%

0.64%

1.41%

1.79% 1.80% 1.87%

Occurrence Year

$194

$138$128 $120

$92

$164

$106

$154

$188

$218 $227

$0

$50

$100

$150

$200

$250

20172016201520142013201220112010200920082007

Occurrence Year

(Th

ou

san

ds)


West Virginia

Loss RateThe loss rate in West Virginia has grown from

a low in 2007 of $2,430 to a projected $7,890

in 2017 .

West Virginia has the highest loss rate among

the profiled states .

FrequencyFrequency has increased from 0 .99 claims per

100 occupied beds in 2007 to a projected

2 .13 claims per 100 occupied beds in 2017 .

West Virginia has the third highest frequency

among the profiled states .

The bulge in claims for occurrence years

2010 and subsequent may be related to the

large jury award in 2011 .

The state legislature explicitly applied

statutory caps to long term care providers

in 2013 and this may have reduced claims

frequency from its peak in 2012 .





0.00

0.50

1.00

1.50

2.00

2.50

3.00

20172016201520142013201220112010200920082007

0.89

0.100.99

1.03

0.121.15

1.31

0.241.55

1.77 1.23

0.55

1.78

1.81 1.66 1.40 1.51 1.56 1.59

2.13

0.43

2.200.65

2.46

0.51

2.17

0.47

1.87

0.55

2.06

0.53

2.09

0.54

Occurrence Year


$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

20172016201520142013201220112010200920082007

$2,430

$3,480

$5,200

$7,610

$4,680

$7,760

$6,540 $6,670$7,250 $7,450

$7,890

Occurrence Year


Severity Severity in West Virginia has been between

$263,000 and $370,000 since 2008 .

The current severity is more than 150% of

the countrywide average severity over the

same time period .


reimbursement rate has increased from a

low of 5 .47% in 2007 to 9 .26% in 2016 .



0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

2016201520142013201220112010200920082007

$174.36

$9.53

$180.64

$14.24

$187.50

$20.84

$193.31

$12.81

$198.92

$21.25

$206.08

$17.91

$212.26

$18.26

$218.42

$19.85

$225.41

$20.40

$233.30

$21.60



5.47%

7.88%

11.11%

6.63%

10.68%

8.69% 8.60%9.09% 9.05% 9.26%

Occurrence Year

$244

$302$335 $346

$263

$315$301

$356 $352 $356$370

$0

$50

$100

$150

$200

$250

$300

$350

$400

20172016201520142013201220112010200920082007

Occurrence Year

(Th

ou

san

ds)


All Other States

Loss RateThe All Other States loss rate is increasing

since 2009 .

FrequencyThe All Other States frequency has increased

from a low of 0 .59 claims per 100 occupied

beds in 2009 to a projected 0 .72 claims per

100 occupied beds in 2017 .


The participants in this study represent approximately 57,400 occupied beds in the remaining states . This is

approximately 10% of the remaining total beds in state .


0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

20172016201520142013201220112010200920082007

0.49

0.16

0.65

0.46

0.15

0.61

0.43

0.16

0.59

0.45 0.47

0.21

0.68

0.50 0.47 0.50 0.50 0.48 0.49

0.72

0.16

0.610.23

0.73

0.23

0.70

0.22

0.72

0.24

0.74

0.22

0.70

0.23

Occurrence Year


$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

20172016201520142013201220112010200920082007

$1,230 $1,170

$840$970

$1,160 $1,190

$1,050

$1,230$1,330 $1,350

$1,440

Occurrence Year


Severity All Other States claim severity is growing

since 2009 and is projected to reach

$201,000 per claim in 2017 .

Liability Costs and Medicaid Reimbursement TrendsThe All Other States liability cost as a

percent of the Medicaid Reimbursement

rate has increased from 1 .42% in 2008 to

2 .04% in 2016 .



0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

2016201520142013201220112010200920082007

$154.37

$3.20

$162.37

$2.30

$167.18

$2.66

$171.66

$3.18

$174.09

$3.26

$177.89

$2.87

$180.45

$3.37

$186.24

$3.64

$189.11

$3.70

$192.97

$3.94



2.07%

1.42%1.59%

1.85% 1.87%

1.61%

1.87% 1.95% 1.96%2.04%

Occurrence Year

$188 $190

$142$160

$171$163

$150

$171$181

$193 $201

$0

$50

$100

$150

$200

$250

20172016201520142013201220112010200920082007

Occurrence Year

(Th

ou

san

ds)


Database and Collection Methodology

In an effort to present a comprehensive analysis from the perspective of all long term care systems,

Aon disseminated a request for data to for-profit and not-for-profit providers including independent

providers, regional multi-facility providers and national multi-facility providers .

The results presented in this study are based on the ensuing database of long term care GL/PL losses

and allocated loss adjustment expenses (ALAE) compiled by Aon and is based on the data provided

by 28 long term care participants . Participants included large national providers, regional providers

and single state operators . Data gathered from the participants was aggregated, resulting in 19,300

non-zero claims and $3 .2 billion in incurred losses . The facilities represented in the national study

operate approximately 211,000 long term care beds, consisting primarily of skilled nursing facility

beds but also including a number of independent living, assisted living, home health care and

rehabilitation beds . They represent approximately 16% of the beds in the United States .

The results found in this study are based on calculations of participant provided data . Providers that

did not participate may have different results, either higher or lower . This may be due to any number

of reasons, including levels of effectiveness in quality of care initiatives and the attractiveness of the

provider for tort actions . Based on standard actuarial techniques, the number of claims, number of

participants and bed representation ensure significant credibility of the results at the national level .

The proportion of statewide bed representation assures significant credibility of the results at the

state level . To increase credibility, a higher response rate among providers would be required .

All long term care results published in this report are based on losses (indemnity plus allocated

adjustment expense) limited to $1 million per occurrence unless otherwise noted . The $1 million per

occurrence limitation was selected to limit the impact of large claims on the results .

The loss rates are presented relative to the Medicaid per diem reimbursement rate . The Medicaid per

diem reimbursement rate is based on preliminary data from Eljay LLC and Hansen Hunter & Company,

PC for the American Health Care Association .2 The Overall Medicaid per diem reimbursement rate is

based on the state exposure distribution inherent in this study .

2 https://www.ahcancal.org/research_data/funding/Pages/Medicaid-Shortfall-Report.aspx


The statistics presented in this report are based on an actuarial analysis of the aggregated long term care

GL/PL claim database and related exposure data . The analysis applies standard actuarial methods to the claim

data to develop ultimate losses and claim counts by occurrence year . These projections are used to calculate the

following statistics presented in this report:

• Loss Rate – ultimate loss projection per occupied bed equivalent

• Overall Frequency – annual number of non-zero claims per 100 occupied bed equivalents

• Indemnity Frequency – annual number of claims with indemnity payments per 100 occupied bed equivalents

• Severity – average ultimate size of each claim, where each claim is limited to $1 million per occurrence

Actuarial Analysis


Conditions and Limitations

Inherent UncertaintyActuarial calculations produce estimates of inherently uncertain future contingent events . We

believe that the estimates provided represent reasonable provisions based on the appropriate

application of actuarial techniques to the available data . However, there is no guarantee that actual

future payments will not differ from estimates included herein .

Extraordinary Future EmergenceOur projections make no provision for the extraordinary future emergence of losses or types of

losses not sufficiently represented in the historical data or which are not yet quantifiable .

Data RelianceIn conducting this analysis, we relied upon the provided data without audit or independent

verification; however, we reviewed it for reasonableness and consistency . Any inaccuracies in

quantitative data or qualitative representations could have a significant effect on the results of our

review and analysis .

Use and DistributionUse of this report is limited for the specific purpose described in the Introduction section . Other

uses are prohibited without an executed release with Aon .

Distribution is unrestricted . We request that Aon be notified of further distribution of this report .

This report should only be distributed in its entirety, including all supporting exhibits .


Definitions

ALAE ALAE is an abbreviation for allocated loss adjustment expense .

ALAE refers to costs, in addition to indemnity payments and

reserves, which are incurred in handling claims . Typically, these

costs are comprised of legal fees paid by the insured entity in

investigating and defending claims . In the context of this study

ALAE represents defense costs . The majority of claim data used

in this study contained a separate field to identify ALAE costs

separately from indemnity costs . Whether separately identified

or not, allocated loss adjustment expenses are included in the

reported loss information, loss reserving methodologies and

loss projections contained in this report . All references to losses

throughout the report and exhibits include ALAE except where

noted otherwise .

Claim A claim is a demand by an individual or other entity to recover

for a loss . It may involve a formal lawsuit but not necessarily,

especially in the case of a general liability claim .

Exposure Actuaries select an exposure base such that the incidence of

claims will tend to vary directly with the exposure of the entity

at risk . The actuary must consider both the historical loss level

and the corresponding exposures in evaluating historical claim

liabilities and expected future costs . It is important to choose an

exposure measure that is relevant to the unique situation of each

risk group .

In this study the exposure base is occupied beds . Occupied

beds are calculated by multiplying the number of licensed

beds by the average annual occupancy rate . There is a strong

correlation between the number of occupied beds and the

total amount of losses incurred by a long term care facility .

Not all beds are equal in terms of their risk exposure, however .

An assisted living bed generates fewer dollars of GL/PL claim

activity than a skilled care bed . All beds in this study have been

adjusted to the equivalent of a skilled nursing care bed .

By dividing losses by exposures, comparative estimates of the

long term care industry GL/PL loss rates are developed .

Frequency Frequency is the ratio of the number of claims divided by

exposures . In this report, frequency is measured on an annual

basis as the number of claims projected for the given time

period divided by the number of occupied beds during that

same period . In the summary exhibits, frequency is the annual

number of claims per 100 occupied beds .

General Liability (GL) General liability exposure relates to those sums an entity

becomes legally obligated to pay as damages because of a

bodily injury (typically including personal and advertising

injury) or property damage .

IndemnityIndemnity refers to the component of claim costs actually paid

or reserved to be paid to the plaintiff . Indemnity costs include

both the amount provided for the plaintiff, either as a jury

award or a settlement, and the amount retained by the plaintiff’s

attorney . However, in most claim files, including those used

to do this study, the split between plaintiff award and plaintiff

attorney is not provided . Indemnity may also include punitive

damages, although this is not consistently treated among

companies .

Indemnification Rate This is the ratio of claims that result in indemnity to all

claims (claims with indemnity and claims with expense

only) . This reflects the likelihood that a claimant will receive

indemnification .

The following definitions are provided to help the users of this report to fully understand the analyses presented and the resulting conclusions .


Definitions (continued)

Limit of Liability A limit of liability is a maximum amount of coverage provided by

an insurance transaction . Above the limit of liability, the insured

is responsible for all losses . Limits of liability may be expressed

on a per occurrence basis or an aggregate basis, similar to

deductibles . The losses included in this study are limited to

$1,000,000 per occurrence .

Loss RateLoss rate is the cost per exposure of settling and defending

claims . Loss rate is calculated as the ratio of total dollars of losses

(indemnity and ALAE) to total exposures for a given period

of time . In this report exposures are selected to be occupied

beds and the time period is one year . Consequently, a loss rate

represents the annual amount per occupied bed expected to be

paid to defend, settle and/or litigate GL/PL claims arising from

incidents occurring during the respective year .

Loss Trend Loss trend is the change in claim frequency and/or severity from

one time period to the next . Factors that affect the frequency

and severity of claims are constantly changing over time .

Examples of causes include inflation, societal attitudes toward

legal action, and changes in laws . Actuaries use trend factors to

adjust historical loss experience to comparable levels .

Occurrence Year An occurrence year is the year in which an incident giving

rise to a claim occurred . All of the loss rate, frequency and

severity analyses use grouped data by occurrence year, unless

specifically noted otherwise . Accident year is interchangeable

with occurrence year .

Professional Liability (PL) Professional liability exposure relates to those sums an

entity becomes legally obligated to pay as damages and

associated claims and defense expenses because of a negligent

act, error or omission in the rendering or failure to render

professional services .

Severity Severity refers to the total dollar amount of a claim including

indemnity and ALAE . In this report, the average severity for a

given year is measured by dividing the total dollars of losses for

all claims incurred in the year by the total number of claims .


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actuarial services to clients for more than 20 years . Our

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presence that positions us to deliver timely results and

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Consulting, we are dedicated to expanding our solutions to

help our clients effectively and proactively manage their risk in

the current dynamic and challenging global economic market .

About Aon’s Actuarial & Analytics Practice

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© Aon plc 2017 . All rights reserved .The information contained herein and the statements expressed are of a general nature and are not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information and use sources we consider reliable, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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2017 Long Term Care - AHCA/NCAL · The specific objectives of this study are to: § dentify the...

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