The St. Paul Companies' decision to end medical malpractice insurance dealt a blow to many long-term care providers in Minnesota and across the country. For many nursing homes in the state, the St. Paul was the last company to offer insurance at reasonable rates.
About five miles down West 7th Street from the St. Paul Company's downtown headquarters stands the Chateau Health Care Center. The Chateau is a nursing home for people transitioning from hospital care to other living situations.
In a lounge, Chateau residents sit around tables, while nurses play old albums.
The Chateau employs more staff than required by contract, which gives nurses here the freedom to provide personal, attentive care.
The St. Paul Company's decision to stop writing medical malpractice insurance threatens that hands-on approach.
Doug Beardsley, administrator of the Chateau, buys insurance from the St. Paul Companies. The St. Paul is the lowest-cost carrier around, despite the fact that premiums have risen some 150 percent over the past two years.
Now that the St. Paul is leaving the business, Beardsley says he's not sure where he'll get malpractice coverage. Whatever happens, rates will almost certainly rise again and that concerns Beardsley.
"Most long-term care runs anywhere between 70 and 80 percent of their expenses as labor. And that is the bulk of how we deliver care - hands-on care. If our other expenses increase, or we're losing money, and we're no longer able to balance our balance sheets. The easiest way and the most available way for us to balance that sheet is for us to cut staff or to cut wages. And that's not a good end run as far as quality care," Beardsley says.
Over the past three years, nine insurers have stopped offering medical malpractice insurance to Minnesota's long-term care facilities. For most, the St. Paul was the last to offer reasonable rates.
Rick Carter, director of Careproviders, a Bloomington-based trade association of long-term care facilities, says nursing homes have a couple of choices. Some may have to simply operate without insurance, risking bankruptcy in the case of a large claim, or they may turn to Medicaid dollars to cover the cost of rising premiums.
"I suppose the state of Minnesota could say, 'Well, these are all reasonable costs, and we have to pay for it, we have to have insurance,' and so we're going to raise prices that we pay for Medicaid patients. And I have to tell you that this kind of a rate increase across the board would cost us hundreds of millions of dollars," Carter says.
The problems associated with the cost of malpractice insurance go beyond long-term care. Health care providers, especially medical specialists, looked to the St. Paul for relatively cheap malpractice insurance. But, unlike nursing homes, Minnesota physicians have other options for insurance.
The St. Paul Companies understands its decision to stop writing medical malpractice insurance is causing hardship. But huge legal settlements in Florida, Texas and other states have made its malpractice business extremely unprofitable. So, it has pulled out of every state, even those like Minnesota, where legal claims have not risen as quickly.
"It's a national issue," according to company spokesman Mark Hamel. "On a national basis, we are losing nearly $1 billion on this business. And certainly there are variations in different states in terms of the scale of those losses. And in some cases they're maybe not as severe. But the fact is, on a countrywide basis, we're losing a lot of money, and we cannot continue to do that."
Some believe the solution to the insurance bind is to limit liabilities in malpractice cases. This solution - also known as tort reform - would make it less expensive to write insurance, and thus make it cheaper to buy.
Dr. Donald Palmisano, secretary-treasurer of the American Medical Association, says it's high time states limit the amount of money patients can win in malpractice cases. "What we have now is a lottery system. And the departure of St. Paul from the professional liability market is another piece of evidence that our tort system is broken and needs to be fixed," says Palmisano.
Beyond advocating for tort reform, Careproviders Rick Carter says members of his association are struggling to find a way to make sure long-term care doesn't deteriorate. What that solution is, though, is a question they have yet to answer.More from MPR