We’ve had a lot of discussion regarding the sizable nursing home negligence verdict in West Virginia against Heartland of Charleston and the parent company HCR Manor Care. If you haven’t heard about this landmark nursing home verdict, jurors awarded $91.5 million to the family of a patient at the facility who died shortly after her admission to the facility from complications related to dehydration and pressure sores.
After unsuccessfully arguing that the verdict should be reduced based upon West Virginia’s caps on non-economic damages in medical malpractice cases, lawyers for the nursing home behemoth have now taken a position that a judge should substantially reduce the verdict or order a new trial based upon errors made during the course of the original trial.
In particular, lawyers for Manor Care claim that the company is a far less profitable organization than was alleged at trial by lawyers representing the patient’s family when seeking punitive damages.
Unlike compensatory damages that are intended to compensate an individual or grieving family for their loss, punitive damages are literally intended to punish the company for its conduct. In order assure that a reasonable punishment is imposed, most jurisdictions allow the jury to take into account the companies profitability—so theoretically, an commensurately appropriate punishment could be imposed against a mega corporation or small business.
In the Manor Care trial, lawyers claim that the $4 billion that the company was alleged to have pocketed in annual profits was merely its gross revenue and the real income was approximately $75 million.
While the actual amount of the Manor Care’s profits may appear to be an inconsequential mathematical exercise, the issue does highlight the complexity of many nursing home operations and the difficulty in understanding the financial structure behind many facilities.
Nursing home operators routinely have multiple derivative companies that may be responsible for the operation of the facility, the real estate that the facility sits on and staffing at the facility. While the entities may look to be independent, a closer examination can typically reveal that they are essentially the same with individuals holding positions at the allegedly separate companies.
Albeit on a massive level, the real profitability of Manor Care’s operations should be examined by a forensic accountant to determine the path of funds that the company pulls in and where the money goes. Given the large discrepancy between the alleged profits in this matter, I suspect that there is a lot more to this situation than is readily apparent.
Nursing home’s earnings misrepresented during trial, lawyers argue, WVgazette.com November 6, 2011