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Huge verdict shakes up nursing home industry

During Cindy Cool's almost daily visits to the nursing home, she would routinely find her Alzheimer's-suffering father wearing urine-soaked clothes.
/ Source: The Associated Press

During Cindy Cool's almost daily visits to the nursing home, she would routinely find her Alzheimer's-suffering father wearing urine-soaked clothes.

The Blue Lake, Calif. resident said it would take upwards of 20 minutes for the apparently short-handed staff of Eureka Healthcare and Rehabilitation to respond and help Cool clean her father. Other patients fared worse, she said.

"A lot of times I walked out of there crying because of the things I saw," Cool said an interview.

She provided key testimony before a Humboldt County jury last month slammed the owners of her father's nursing home with a $677 million verdict, sending shock waves through the industry and rekindling calls for tort reform.

The verdict as it stands is already thought to be the largest in the country this year and its ramifications are still being sorted out weeks after the jury surprised even the plantiffs' lawyers with the size of their verdict. Tort reformers have seized on the verdict as the latest example of litigation abuse.

The company's stock price has plunged on fears it will have to file bankruptcy. Cool, 58, was part of a class-action lawsuit representing 32,000 patients that blamed the nursing home staff shortage for the misery she encountered — echoing a common complaint across the country that for-profit nursing homes are too concerned with the bottom line.

After Wall Street investment firms went on a nursing home buying spree during the early years of the new century, critics charge that many companies drastically cut payroll expenses to prop up stock prices.

"The major problem for most nursing homes in California and in the nation is staffing," said Pat McGinnis, executive director and founder of the California Advocates for Nursing Home Reform.

Many of the 16,100 homes nationwide are owned by public companies. The home where Cool father's lived and died in 2006 is owned by Skilled Healthcare Group Inc., which is traded on the New York Stock Exchange.

On July 6, the Humboldt County jury found that Skilled Healthcare on numerous occasions violated state regulations requiring it to keep a minimum number of nurses on duty at its 22 homes in the state.

James Gomez, president and chief executive of the California Association of Health Facilities, called the verdict "outlandish, excessive and extreme" and said a "good provider of skilled nursing care" is likely bound for bankruptcy if the verdict holds up, threatening the livelihoods of 14,000 California workers.

The lawsuit accused Orange County-based Skilled Healthcare of failing to maintain 3.2 nursing hours per patient per day at its 22 nursing homes in California. The company is just the 10th largest, based on beds, in an industry that struggles to keep workers.

"The verdict is a statement that facilities must follow the law and meet minimum standards," McGinnis said.

McGinnis said the 3.2 nursing hours required by California should be an easy standard to meet because it's nearly a full hour less than the federal recommendation of 4.1 nursing hours per patient.

"The fact that this company couldn't maintain these minimum standards makes you wonder why it was in the nursing home business to begin with," McGinnis said.

Skilled Healthcare Chairman and CEO Boyd Hendrickson said in a statement immediately after the verdict that the company is "deeply disappointed" in the verdict and believes its nursing homes are appropriately staffed.

"We strongly disagree with the outcome of this legal matter, and we intend to vigorously challenge it," he said.

The company's options, however, appear to be shrinking.

On Thursday, Humboldt County Superior Court Judge Bruce Watson shot down one of the company's challenges when he denied its demand for a mistrial based on juror misconduct.

Meanwhile, the company's ability to appeal is in question. Typically, parties challenging a trial court decision are required to post 150 percent of the verdict as a bond. The company doesn't have the cash or credit to post the $1 billion-plus bond. It also likely faces bankruptcy if the jury's verdict stands up.

Both sides are currently in settlement negotiations, and legal analysts said there's good chance that the sizable verdict will be reduced.

That is what happened in another high-profile nursing home verdict won in 1998 by Michael Thamer, who is now lead lawyer in the Skilled Healthcare lawsuit.

A Siskiyou County Superior Court jury awarded his client Reba Gregory $95 million after a nursing home attendant dropped her during a bed transfer, fracturing her hip and shoulder. Thamer convinced the jury that two attendants should have attempted the transfer and that Gregory's injuries were the result of staff shortages.

A judge later reduced the $95 million verdict to $3.1 million.