The state’s nursing homes call it excessive and intrusive. The Malloy administration calls it a move towards transparency.
At issue is a proposed bill that would require nursing homes to disclose the financial status of any “related party” businesses that contract with the homes – such as associated companies that own the facility properties, or spinoff businesses that provide rehabilitation or management services. The bill would require that the nursing homes report profits and losses for any side businesses that receive more than $10,000 a year from them.
The Malloy administration – backed by the union representing nursing home workers, New England Health Care Employees Union, District 1199 – has pushed the bill through legislative committees, touting it as a way to increase transparency in an industry marked by bankruptcies, takeovers and several high-profile scandals in recent years. Chief among the arguments is that the added reporting will help the state to identify nursing homes in true financial distress, versus those that claim money woes, but actually have profitable affiliated businesses.
“We have an interest, as a state that’s providing so much funding to these nursing homes, to be able to assess the real financial condition of all the interrelated businesses,” Deborah Chernoff, public policy director for District 1199, said in testimony to the legislature.
She cited bankruptcy filings by nursing homes owned by two chains — Haven Healthcare, in 2007, and HealthBridge Management, in 2013 – as cases that highlight the need for financial transparency.
But the associations representing Connecticut nursing homes are pushing back, saying they already report on related businesses in detailed cost reports filed with the Department of Social Services, and that the new measure is simply a bone being offered to the union, in an election year.
They note that no other state-funded health care entities are forced to disclose profits and losses from side businesses – and that the DSS commissioner, Roderick Bremby, had opposed similar bills in the last two legislative sessions. In 2012 and 2013, Bremby had called the reporting requirement “excessive” and not “meaningful” in gauging a nursing home’s financial health.
“It was conceded at the [recent] public hearing that the information has no value in terms of DSS meeting its public duties and responsibilities in the setting of rates, performing audits, or evaluating the financial condition of nursing facilities,” said Matt Barrett, executive vice president of the Connecticut Association of Health Care Facilities.
“What did become clear . . . is that the measure, if adopted, will put into the hands of nursing home competitors sensitive and private business records, and that there is no other example of this anywhere in Connecticut state government.”
Instead of helping DSS, Barrett argued, the bill seems geared to helping labor unions “exploit” financial information about nursing homes to gain leverage in contract negotiations.
Under questioning by lawmakers, state budget chief Ben Barnes acknowledged that the additional information could be useful to employees negotiating for wages and benefits. But he and Bremby maintained that the profit-and-loss reports would provide DSS with a more complete picture of a home’s financial standing, when it reviews requests for state rate increases.
“If you’re paying yourself rent as a way to have your profits appear in (one) part of your business, as opposed to another, in order to receive more favorable rate treatment from the state, that’s something we need to know about,” Barnes said.
Nursing home owners noted that homes already are required to disclose payments to related entities – defined as companies connected through family association, common ownership or business association with the owners — on detailed cost reports filed with DSS. But they are not required to provide profit-and-loss statements for those entities.
Asked by lawmakers why he changed his mind about the proposal, Bremby cited a few differences in the language of the new bill, compared to the previous versions, including a liability clause that he said shields DSS from having to act on the information it receives.
In 2012, Bremby had spoken against the proposed reporting requirement, saying it was “not necessary for the Department to have all of this information on file for every year for every provider,” and instead could request such information, if needed. He also had said that he opposed the exclusion of non-profit homes in the 2012 proposal.
The administration’s original proposal this year covered non-profit as well as for-profit nursing homes – which Barnes called “absolutely appropriate,” given that non-profits “also use related companies as a way to manage their business.” But the bill since has been amended to apply only to for-profit homes.
The push for “transparency” comes as the number of nursing homes in the state dwindles because of financial pressures and a shift towards home-based care.
The Haven Healthcare chain filed for bankruptcy after a series in the Hartford Courant detailed a history of poor care and dubious financial transactions, including the owner’s diversion of funds to his Nashville music company. In that case, the new reporting requirement would not have helped DSS uncover the transactions, because the music company was not doing business with any of the Haven homes. The current proposal does not ask nursing home owners to disclose their unrelated business ventures.
More recently, five HealthBridge homes embroiled in a labor dispute with District 1199 filed for bankruptcy, claiming employee costs forced them into financial crisis. A sixth home was closed down in 2012. Union officials have questioned HealthBridge’s claims of financial trouble, in the absence of information about whether its larger management company or affiliated businesses were making a profit.
While not directly related, union officials said, the recent indictment of former Gov. John Rowland has underscored the need for more transparency. The indictment charges that nursing home owner Brian Foley funneled $35,000 to Rowland, through entities related to his Apple Rehab chain, under a sham consulting contract intended to disguise Rowland’s political work on the campaign of Foley’s wife, Lisa Wilson-Foley. Both Foleys have pleaded guilty; Rowland has pleaded not guilty.
The proposed bill, which passed the judiciary committee by a vote of 26-14, will be taken up by the legislature in the remaining weeks of the session.
Nursing facility rental payments can be a function of a facility’s corporate structure and financing arrangement, whereby rent covers normal mortgage costs, real estate taxes, property insurance, replacement reserves, and mortgage insurance paid by the related realty entity. Budget Chief Barnes’ comment that paying yourself rent is a way to receive more favorable rate treatment from the state incorrectly describes the reimbursement system in CT. Any rent paid to a related party company is disallowed for rate setting purposes on the State’s rate computation report, and instead is replaced with a calculated a real property fair rent payment. Therefore no favorable rate is received by a facility.
Transparency in nursing homes or smoke and mirrors? Those who are charged with caring for our elderly should be held to a higher standard.
Consider this: In 2013 Pharmaceutical companies paid a record 2.2 billion dollar settlement to the Justice Department for illegally marketing harmful antipsychotic drugs to nursing homes. There were no prosecutions, though the original indictment included allegations of kickbacks to nursing home industry Facility Directors and their contracted Pharmacists. Medicare which administers Nursing Home regulation proposed and then withdrew a regulation last year to ensure that Pharmacists who work with Nursing Homes are independant rather than drug company or facility employees.
In March this year the Federal Office of Inspector General for Health and Human Services issued a report citing that 1 out of 3 patients in Nursing Homes are preventably harmed by their care, resulting in an addtional 2.8 billion dollars per year in additional medical costs.
A February 2013 Report from the same Inspector General found that “Skilled Nursing Facilities Often Failed to Meet Care Planning and Discharge Planning Requirements.” The study found that Medicare paid 5.1 billion dollars for nursing home stays that did not meet quality of care standards.
In 2008 then Attorney General Richard Blumenthal responding to CT’s Haven Healthcare scandal wrote a letter to the Hartford Courant warning that large corporate control of nursing homes endangered patient safety. “As nursing homes are swallowed by corporate chains and conglomerates such as Haven, state supervision becomes more difficult. Byzantine corporate constellations – like the 45 interlocking entities established by Haven’s owners – conceal and confuse, frustrating accountability and oversight. Such improper practices must be prevented, not just punished. The state must demand more financial disclosure and transparency to prevent plunder of nursing home assets.”
In 2009, Blumethal wrote a letter with the Attorney Generals of 28 other states calling for a national system for rating nursing homes. Medicare’s Nursing Home Compare provides a metric for consumers that is misleading at best. If North Korea were the 51st state it too could have 4 and 5 star Nursing Homes because the comparisons are made are only within a state. There is always a top and a bottom and there is no national standard. The ratings are based in part on so called “Quality Measures” which are provided by nursing homes and not checked for accuracy.
In 1975 The Senate Special Committe on Aging Issued a report entitled: “Nursing Home Care in the United States: A Failure in Public Policy.” It’s subtitle: “Drugs in Nursing Homes” Misuse, High Costs, and Kickbacks.” Given the reports cited above have we made any progress?
The truth is that the nursing home business is commonly treated by industry spokeman, government officials, and regulators as “commerce” supporting the economy, and as, such this “too big to fail” logic puts public accountability on a back burner . One could wallpaper the statehouses of 50 states with reports and news articles about harm to elders and lapses in care.
The politics and money of this industry which set the standard for profits and non profits alike curries influence in the halls of government to diminish transparency and accountability at every turn, We know that there is a strong voice protecting business interests but who protects the elders?