Company owns 2 area facilities, blames 'litigation environment'
By Nick Tabor, New Era Senior Staff Writer
Following a history of lawsuits, and in light of a litigation reform bill failing in the General Assembly this year, a major nursing home chain plans to unload its facilities in Kentucky to a Texas company.
The corporation, Extendicare Health Services, Inc., owns Pembroke Nursing and Rehabilitation Center, Shady Lawn Nursing Home in Cadiz, and 19 other homes in Kentucky. In a 2009 study that ranked 10 Kentucky facilities among the country’s worst nursing homes, three of those belong to Extendicare.
Extendicare also owns facilities in 11 other states as far apart as Oregon and Pennsylvania.
Extendicare announced last week it will lease all of its Kentucky facilities to a long-term care operator in Texas for a 10-year period. The operator can extend its lease or buy the facilities if it wishes.
The transfer will likely occur in the third quarter of this year, assuming it receives third-party approval, including state licensure approval.
Extendicare’s President and CEO Tim Lukenda said in a news release that the company “did not arrive at this decision easily.”
“However, the combination of a worsening litigation environment and the lack of any likelihood of tort reform in the State of Kentucky has made this the prudent decision for our company and its unitholders,” Lukenda said.
Extendicare did not respond to the New Era’s follow-up request for information on the new operator.
Though Lukenda spoke of a generally poor “litigation environment,” the company as a whole and Pembroke Nursing and Rehabilitation Center in particular owe a substantial share of their legal troubles in Kentucky to a single law office in Lexington.
A public service?
Wilkes & McHughes, P.A., a national plaintiffs firm that specializes in nursing home litigation, has a small team of lawyers at its Lexington office. They take cases in four states but concentrate on Kentucky, said Lisa Circeo, one of the attorneys.
While visiting Bowling Green last year to litigate against another Extendicare facility, Circeo sat down for an interview with the New Era.
Pembroke Nursing and Rehabilitation Center has been sued 20 times in Christian Circuit Court since 2002, and seven of the lawsuits are still pending. The rest were dismissed before trial, most with confidential settlements.
Circeo’s firm filed 13 of those 20 lawsuits. It is handling all seven of the active cases.
Usually Circeo or her husband, Richard Circeo, sues on behalf of a person who lived at an Extendicare home — in this case, at Pembroke — or on behalf of a patient’s family after the person dies.
The lawsuits often accuse the facility of not providing enough staff and causing patients’ condition to deteriorate rapidly. Sometimes they point out evidence of patients being left in filth, developing bedsores, becoming dehydrated and acquiring diseases such as gangrene.
Many nursing home cases in Kentucky are funneled to Circeo’s office.
Another lawyer might take on a case against Extendicare, and then, after realizing he’s in over his head, call Wilkes & McHughes for help, Circeo said.
The company has also run advertisements to attract former clients of Extendicare homes.
The firm’s experience with Extendicare makes the lawyers more efficient and powerful. They have an enormous stockpile of records from nursing home inspections; they understand Extendicare’s complex corporate structure to an unusual extent; and they have used their own clients as witnesses in other clients’ cases.
“It’s a matter of not having to reinvent the wheel,” Circeo said.
In Circeo’s view, her firm’s work has a dimension of public service: It holds nursing homes accountable.
Bernie Vonderheide, director of Kentuckians for Nursing Home Reform, holds the firm in high esteem.
“From what I see, they’re doing a good job in Kentucky,” he said. “If they, by their work, can weed out some of these poor-quality operations, I applaud them.”
But others fault Wilkes & McHugh for targeting care providers. Luanne Porter, Pembroke Nursing and Rehabilitation Center’s former administrator, said last year the firm had caused her facility many headaches.
“We do not believe the volume of lawsuits filed by this law firm is in any way reflective of the care and services we provide at Pembroke Nursing and Rehabilitation Center,” Porter wrote in a statement.
Prospect of reform
This past General Assembly, Kentucky’s House of Representatives reviewed a bill that would have made it harder to sue nursing homes. It would have required every new lawsuit to go before a medical review panel before an attorney could file the suit in court.
Wanda Meade, a nursing home administrator, testified about an increase in lawsuits filed by out-of-state lawyers. Meade said they target nursing homes with clean health-inspection reviews, according to a story from the Lexington Herald-Leader.
Personal injury lawyers know nursing homes will settle instead of paying for three to five years of litigation, even if the nursing home considers the claim bogus, said lawyers for the nursing home industry. They said such lawsuits are driving up malpractice insurance and the cost of care in Kentucky, according to the Herald-Leader’s story.
Tom Burch, chairman of the House’s Health and Welfare Committee, said in March the bill needed further study and work. He said it might come up for review again this summer.
Extendicare evidently became despondent about this prospect. Before interest, income taxes, depreciation, amortization and accretion, the company only makes $17.5 million a year from its Kentucky facilities, according to its news release.
“The decision to exit the State of Kentucky is consistent with Extendicare’s continuing strategy for achieving ongoing performance improvements that involves the divestiture of operations that impede growth or create undue risk exposure,” the news release states.
A new administrator replaced Porter at Pembroke Nursing and Rehabilitation Center at the end of April, the staff said.
Mike Perry, Extendicare’s area vice president for Kentucky, said his company chose the Texas operator after a “careful search.”
“We are working closely with the new operator’s personnel to ensure a smooth transition for employees, residents and their families,” Perry said in a statement.
Without more information about the new operator, there’s no way to evaluate how its leadership will change the facilities. But Vonderheide expressed cautious optimism.
“All advocates like us want is a company that will provide good care and quality service for their residents,” he said. “If Extendicare can do that, that’s fine. If they can’t, then we’re glad that they’re pulling out so we can get someone in place who can do a good job.”