Carlyle Group's LifeCare in Long Haul Defense of Katrina Deaths

The Carlyle Group closed the deal for LifeCare Hospitals on August 11, 2005. Hurricane Katrina struck the Gulf Coast two weeks later. The LifeCare unit inside Memorial Medical Center lost 24 patients during their five day wait for rescue. Beginning in September 2006 LifeCare's SEC filings included the following statement:

We have been named as a defendant in various civil lawsuits and actions filed with the Louisiana Patient Compensation Fund by former patients at Memorial Medical Center who allege damages as a result of injuries sustained during Hurricane Katrina.

We are currently defending ourselves against a variety of Hurricane Katrina related lawsuits or matters under review by the Louisiana Patient Compensation Fund. We are vigorously defending ourselves in these lawsuits, however, we cannot predict the ultimate resolution of these matters.

How long does it take for the Louisiana Patient Compensation Fund to complete a review? It's going on five years since Katrina pummeled the coast. The Louisiana Patient Compensation Fund 2005 strategic plan provides insight into how it operates:

Whenever possible, attempt joint settlements with primary carrier or self-insured so PCF can negotiate while liability is still an issue.

LifeCare doesn't want to settle. It's vigorously defending the company, using innovative (i.e. laughable) legal strategies. Carlyle attorney's claim patients became wards of the federal government as soon as FEMA evacuation teams set up in New Orleans. This ignores LifeCare's responsibilities, including caring for patients until they can be safely transferred to able clinicians. In the meantime, LifeCare had a duty to keep non-LifeCare physicians and employees away from patients.

LifeCare has a carrier, although it is not identified in the company's SEC filings. It's latest 10-K states:

On June 5, 2009, we reached an agreement with the insurance carrier regarding the reservation of rights matters whereby they will continue to pay all costs, indemnification and related expenses for the Hurricane Katrina claims in consideration for $1.0 million to be paid by us, payable in three equal installments, due July 1, 2009, March 31, 2010, and March 31, 2011.

While patients and loved ones wanting justice face a long haul, Carlyle received compensation quickly. LifeCare received settlements of $12.3 million for damages related to Hurricane Katrina in 2006. They settled with Tenet Health, owner of Memorial Medical Center in a sealed agreement. The White House Lessons Learned Report omitted any mention of the hospital with the highest patient death toll.

LifeCare continues paying Carlyle a $500,000 annual management fee.

String it out, watch victims fall by the wayside. That describes the Bush Katrina rescue and Carlyle's legal defense strategy on LifeCare.