Multi-million Dollar Jury Damage Awards…. It’s a New Day for LTC

Last week Skilled Healthcare Group, Inc., one of the nation’s largest providers of skilled nursing, rehabilitation, and hospice services, settled an understaffing lawsuit for $50 million in its skilled nursing facilities, avoiding a $677 million jury award. On news of the settlement, the Company’s stock value rose as much as 31%. The class-action lawsuit resulted in a jury award of $677 million in damages for allegations that the company understaffed 22 of its California facilities, which is thought to be the largest award in the US this year.

Skilled Care seems to have a strong compliance program and presence. It has a code of ethics and business conduct. The Company seems ahead of many in the compliance arena. So, what went wrong?

This story is a harbinger of more compliance risk to come.
Compliance can no longer address mere minimums to reduce risk; it cannot be driven entirely in response to regulators. Compliance has to grow out of an ethical culture that rewards honest reporting and other processes such as audits and independent investigations that are reported at high levels. These practices cause important findings to be triaged and addressed with the sense of urgency they require. If problems were identified with the staffing data being kept by Skilled Healthcare, compliance systems were needed to escalate those problems quickly to high levels where they could be analyzed fully and corrected company-wide. If facilities were not following the Company’s policy in regard to staffing, compliance needed to be there with the capability of raising the issue in whatever way was required to get it resolved.

It’s a new day where compliance is concerned. One thing we know for sure is that the regulators, advocacy groups, lawyers and juries will be happy to “catch” us and create the pain that often precipitates change. We need to do this for ourselves so that we are not continually dragged around by outside forces, paying handsomely and living under threat of being bankrupted by forces we cannot control. Doing this will require new thinking, new actions, new commitments from long-term care. It will require significant change.

Ethical culture is deeper than mere compliance--it is everyone in the organization “doing the right thing” simply because it is the right thing to do, not because they fear negative consequences. In an ethical culture, all staff, visibly led by executive staff, are completely invested in doing well by doing good, even when it isn’t easy. This produces a much more positive, life-affirming environment in which to live and work because it is driven by doing good rather than by fear. Doing good breeds doing good and fear breeds fear.

Long-term care has done so much unrecognized good—we need to build on that with our compliance programs and practices.  Many organizations are doing this successfully.  I'd be interested to have you share your thoughts about how your company is doing this.