By ANDREA PETERSEN
Staff Reporter of THE WALL STREET JOURNAL
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April 27, 2005; Page D5

The crisis of skyrocketing malpractice insurance premiums and expensive jury awards that has afflicted the nursing-home industry in recent years appears to be easing overall, according to a study being released today. But the picture is still bleak in certain states, such as Arkansas, where costs are continuing to soar.

Nationwide, the cost of malpractice insurance increased an average of 18% in 2004, down significantly from an average increase of 51% in 2003, according to the study. Liability costs per bed inched up 1.8% to $2,310 in 2004 from $2,270 in 2003. The average claim size fell slightly to $176,000 in 2004, from $180,000 in 2003. Liability costs include the cost of malpractice insurance and litigation.

The study was funded by the American Health Care Association, a trade group for the long-term care industry. It was conducted by Aon Corp., a large Chicago insurance-brokerage company that does business with nursing homes . The study surveyed 76 long-term care providers around the country.

Costs are stabilizing because some states with huge nursing-home populations, including Florida and Texas, have seen their costs ease amid new laws that limit the damages awarded in lawsuits. Also, some big nursing-home operators that were the target of many lawsuits have sold their operations in high-cost states such as Florida.

The issue of lawsuits continues to be a concern for the long-term care industry and is likely only to increase in the coming decades, as baby boomers begin to need care. According to a 2003 study surveying 464 attorneys by Harvard University researchers, more than half of lawsuits against nursing homes that were studied claimed wrongful death. Others involved issues such as bedsores and emotional distress.

In some states, costs remain high. In Arkansas, the liability cost per bed reached $16,980 in 2004, up from $14,550 in 2003. In Mississippi, the liability cost per bed fell slightly to $10,380 in 2004 from $10,400 in 2003, but still is far higher than the national average. Both states had big increases in the number of pricey claims.

Rising malpractice and litigation costs have driven some nursing homes to cut their liability insurance or to drop it all together, a move that is called "going bare." This can be risky for patients and families: If a patient is harmed and wins a lawsuit, an uninsured operator may not be able to pay the award. Insurance premiums also have risen sharply for doctors who work in long-term care facilities, pushing some of them to stop treating nursing-home patients.

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