Florida's nursing home industry has experienced significant financial pressure over the past decade. One of the primary reasons is the dramatic increase in litigation activity for nursing home providers claiming negligent care and abuse. Although anecdotal reports indicate a higher cost because of malpractice in nursing facilities, few studies have examined the extent of malpractice paid losses
and their effect on the financial performance
of nursing homes
The purpose of this study was to examine the impact of malpractice paid losses
on the financial performance
of nursing homes
Medicare Cost Report data and Online Survey, Certification, and Reporting data for Florida skilled nursing facilities over the 6-year period from 2001 to 2006 were used to calculate the malpractice paid losses
and the financial performance
indicators as well as the nursing home organizational and market factors. Descriptive analysis and multivariate regression analysis were used to examine the effect of paid loss on financial performance
The paid loss for malpractice claims was strongly associated with financial performance
. Nursing facilities with malpractice paid losses
had consistently lower total margins over the study period. The threat of nursing home litigation may create an incentive for nursing homes
to improve quality of care; however, large paid claims can also force nursing homes
into a financial situation where the organization no longer has the resources to improve quality.
Nursing home managers must assess their malpractice litigation risk and identify tactics to mitigate these risks to better provide a safe and secure environment for the older persons. In addition, this research offers support for local, state, and federal policymakers to revisit the issue of malpractice litigation and the nursing home industry through its insight on the relationship of nursing home margins and litigation.