September 18, 2006 Evelyn Pringle
In 1987, Congress passed landmark legislation aimed at improving nursing home care for the nation’s vulnerable elderly population. However, a recent investigation by Consumer Reports found poor care in nursing homes is still extremely common, especially in the for-profit chains that have become the dominant force in the industry.
The Nursing Home Reform Act requires nursing homes to comply with federal regulations for quality of care and specifically states that “a nursing facility must care for its residents in such a manner and in such an environment as will promote maintenance or enhancement of the quality of life of each resident.”
However, Consumer conducted an analysis of state inspections for some 16,000 homes nationwide and reported that “two decades after the passage of a federal law to clean up the nation’s nursing homes, bad care persists and good homes are still hard to find,” in a September 2006 report.
When nursing home facilities are found to be out of compliance or have deficiencies that put residents in immediate jeopardy, states are required to refer case information to Centers for Medicare & Medicaid Services (CMS) for enforcement action.
Once the state refers a case, CMS determines what enforcement actions are warranted. Mandatory remedies are actions that CMS is statutorily required to take to address egregious or extended cases of noncompliance and include termination of the facility’s Medicare contract and the denial of payment for new admissions (DPNA).
In enforcement actions, CMS is required to apply the denial of payment remedy for facilities that fail to return to substantial compliance within 3 months and is required to terminate Medicare contracts with facilities that fail to return to substantial compliance within 6 months, or have unabated immediate jeopardy deficiencies for 23 days.
CMS is required to terminate the Medicare contract when the facility still has not reached compliance after application of the required DPNA at 3 months.
For all facilities found to have provided substandard care on three consecutive surveys, CMS must apply the remedies of DPNA, state monitoring of the facility, and the state must notify the attending physician of each affected resident and the state licensing board.
As part of the Office of Inspector General’s (OIG) evaluation of the quality of care in nursing homes, an analysis was recently conducted to determine the extent to which the CMS applied the “mandatory remedies” for nursing homes not in compliance.
The OIG released a report in May 2006, that found that in 55 cases requiring the termination of the Medicare contract during 2000-2002, the CMS did not apply the remedy as required in 30 cases or 55%.
The review found that 23 cases that required termination because they were noncompliant for 6 months were not terminated and through reviews of surveys following the study period, the OIG found that all of the facilities not terminated had new cases of noncompliance, serious enough to again require referral to CMS for enforcement action.
Of the 706 cases in 2002, requiring DPNA remedies, the report said 28% were never applied and 14 percent were applied late.
No doubt tired of waiting for the Federal government to act, state law enforcement agencies are cracking down on abuse and neglect of patients in the nursing homes. On January 6, 2006, New York Attorney General, Eliot Spitzer, announced the arrest of 19 employees at two separate nursing homes where hidden cameras produced evidence of serious patient neglect.
In addition to the prosecution of criminal charges, the Attorney General’s office also filed a civil lawsuit against the corporations that control one of the nursing homes, including the primary owner and operator of the facility, Anthony Salerno, and a consulting company he owns known as Healthcare Associates.
“The residents of our state’s nursing homes are among our most vulnerable citizens,” Mr Spitzer stated in the press release. “My office is committed to doing all it can to protect these individuals, who are sometimes without friends and family to protect their interests.”
“With these cases,” he said, “we are trying to send a message that law enforcement is watching to ensure that appropriate standards of care are met.”
The first case involves the Jennifer Matthew Nursing Home in Rochester and was developed through the use of secretly recorded videotapes of a bedridden patient, referred to in the court filings as “Patient A.” The patient’s family permitted the Medicaid Fraud Control Unit to install a hidden camera to monitor interaction between the patient and nursing home staff.
The criminal complaint describes evidence of how Patient A and other residents were not turned and repositioned to avoid the risk of pressure sores, and were often left for hours to lie in their own urine and feces, and alleges that medications and treatment were not provided as prescribed.
The court filings describes how the staff would move call bells away from patients and stop doing their rounds so that they could socialize, sleep, watch movies, or even leave the building.
Staff members are also accused of falsely claiming in required paperwork that proper care had been provided to the patients.
The second case involves the Northwoods Nursing Home and again, the family of a resident consented to the installation of a hidden video camera.
According to criminal complaint, the camera revealed that licensed professionals repeatedly failed to provide care or treatment to the resident, and then falsified records to report that proper care had been administered.
Five employees were charged with Falsifying Business Records in the First Degree, a class “E” felony, and misdemeanor neglect and endangerment in the Northwoods case.
These and other patient neglect cases prompted a report by the Attorney General’s office that gives the details of staffing levels at nursing homes throughout the state to assist the public in choosing an appropriate nursing home.
Government studies have shown a strong relationship between staffing levels and quality of care, and have identified a threshold, referred to as hours per resident day or “HPRD,” below which the quality of care suffers.
On the basis of these studies, some states have set minimum staffing levels for nursing homes. In its report, the Attorney General’s Office lists each nursing home in the state, its HPRD ratio, and states whether that home would meet the standards set in other states or a threshold described in a 2001 federal study.
The report urges consumers to visit homes, actively monitor the level of care being delivered, and talk to others with family members or friends in the home.
In another Medicaid fraud case, on May 26, 2006, Attorney General Spitzer announced that a grand jury had indicted former nursing home owner Abe Zelmanowicz for stealing more than $3 million from the Medicaid program.
Zelmanowicz, and the entities which formerly owned the two homes, were arraigned on a 21-count indictment with one charge of Grand Larceny in the First Degree and 20 counts of Offering a False Instrument for Filing in the First Degree. If convicted, Zelmanowicz could face up to 25 years in prison.
According to the indictment, from January 1, 1997, to August 27, 2003, Medicaid payments were made to the homes based on submissions by Zelmanowicz, which claimed that the facilities were properly reserving or “holding” a resident’s room when the resident was temporarily hospitalized.
Under New York law, nursing homes are only allowed to temporarily bill for “bed holds” when the home is 95% occupied and when the hospitalized residents had lived in the nursing home for at least 30 days prior to hospitalization. Zelmanowicz is accused of billing for “bed holds” when he knew that he was not entitled to receive payments under these regulations.
The indictment further alleged that Zelmanowicz submitted false claims for payment, which showed Medicaid patients were receiving ventilator treatment when the patients were not. Medicaid pays significantly more for patients who receive ventilator care.
The complaint charges that Zelmanowicz took an $800,000 annual salary from the nursing homes, and ignored the repeated warnings of his accountants to end his wrongful billing practices and repay the Medicaid program and that Zelmanowicz was warned by his staff that he was violating Medicaid rules but that he nonetheless instructed the staff to continue submitting the fraudulent claims.
In addition to criminal charges, the Attorney General filed a civil lawsuit against Zelmanowicz and his partner, Rebecca Rich, as the former owners of two homes, which they sold in September 2002.
The civil suit seeks asset forfeiture from Zelmanowicz and Rich and repayment by Zelmanowicz of three times the amount he fraudulently billed. Altogether, the civil complaint seeks more than $12 million.
Attorney General Spitzer says that this case illustrates how Medicaid fraud is not only a matter of phantom patients and fly-by-night operations. “In this case,” he said in the press release, “two substantial facilities, in business for many years, with real patients, were used as a means to extract money from Medicaid by hiding crooked billings among the mass of real services.”
According to the Attorney General’s office, New York’s Medicaid program pays $11 billion a year for nursing home care. The federal government pays for half, with state and local governments picking up the rest of the tab.
Mr Spitzer’s dogged investigations have paid off well for New Yorkers. In 2005, his office recovered $274 million in Medicaid fraud, compared to $63 million in 2004.
In recent years, the nursing home industry has lobbied hard to make it difficult for private individuals to sue nursing homes. Some states have already passed laws to limit damage awards. “Generally,” Consumer Reports says, “that means legally imposed caps, typically $750,000 on punitive damages and $250,000 on noneconomic damages for pain and suffering.”
Nursing homes claim they need caps to predict operating costs, particularly for liability-insurance premiums. However, according to Consumer, “caps make it more difficult for victims to find a lawyer willing to take the financial gamble of representing them.”
Critics say litigation is the only method available to make the large nursing home conglomerates clean up their act. “Litigation can hold corporations accountable for poor care,” according to Attorney Kennard Bennett. “Over time,” he says, “the goal of this type of litigation is to make it cost more to provide bad care than to provide good care.”
Virginia Attorney, John Harris III, also says “the way to clean up nursing homes is to make it more expensive to neglect the residents than it is to take proper care of them.”
Cases involving gross abuse and neglect that do make it to a jury are seeing large awards. The May 18, 2006, Associated Press reported a case where a North Idaho jury awarded $18 million for the death of an elderly man where the nursing home staff committed “more than 700 violations of federal nursing home regulations.”
The staff eventually caused the man’s death with repeated dosages of Haldol, a powerful anti-psychotic drug they used to control him after he tried to leave the home, said Richard Eymann, the attorney for the man’s son.
“This jury verdict sends a message to the entire nation,” Mr Eymann told the Associated Press. “Nursing home abuse, including the use of sedating or mind-altering drugs to profit off senior citizens, will not be tolerated. It is our hope that the verdict will help change the culture in nursing home care.”
The large for-profit chains are erecting other barriers to shield themselves from lawsuits. For instance, some facilities now require families to sign binding-arbitration agreements before a family member can be admitted.
Some chains have come up with ways to restructure their businesses to insulate them from liability. Consumer’s Report explains how it works:
“A nursing-home chain splits itself into little pieces, called “single-purpose entities.” Some of these entities own the individual nursing homes, while others lease and operate the facilities, effectively putting the company’s major assets–its real estate–beyond reach of a lawsuit.”
In Mississippi, Special Assistant Attorney General, Scott Johnson, told state legislators last year, that if a home’s license holder does not own the facility or any assets, legal action is pointless. “You can’t collect money from someone who doesn’t have any,” he said.
Earlier this year, Beverly Enterprises Inc, the nation’s second-largest for-profit nursing home chain, was sold to an affiliate of Fillmore Capital Partners, a private equity firm. The operating company, called Golden Gate National Senior Care Holdings LLC, will operate 262 nursing homes, and a new company, Geary Property Holdings, will own the land and the buildings.
According to the May 26, 2006, Northwest Arkansas News, Fillmore paid $12.50 a share to acquire Beverly in a $ 2.29 billion deal that closed in March 2006.
“As part of the corporate restructuring, the nursing homes have been split up into separate companies,” Golden Gate spokesman Blair Jackson told Northwest News.
“The 80 nursing homes we lease,” he explained, “will retain the name Beverly Healthcare, and the other nursing homes are operating under the new name of Golden Gate National Senior Care.”
As part of that process, Mr Jackson said, Geary Property Holdings, a new separate company was created to own the real estate.
Geary Property now owns the buildings and the land, he said, and Golden Gate is the operating company that runs the 262 nursing homes.
“The move limits the liability of the parent company,” Northwest News notes.
Judging from the salaries of its top executives, Beverly was surely not broke when it decided to implement this elaborate liability protection scheme. As company Chairman, CEO, and President, William Floyd earned $2.23 million a year, according to court filings. He was also the largest Beverly shareholder with approximately 803,972 shares of stock at a market value of about $9,326,075.
As the Chief Operating Officer of Nursing Facilities and Executive Vice President, David Devereaux, was paid a salary of about $854,000, and he was the second largest shareholder with approximately 255,204 shares at a value of about $2,960,366.
According to court documents filed on December 22, 2005, as part of the sale, Mr Floyd, Mr Devereaux, and other executives and board members, will receive payments totaling $109 million. Mr Floyd’s severance package alone was $40 million.
In 2003, Lisa O’Bradovich was an administrator at a Beverly owned nursing home in Tekamah, Nebraska. She says her job was short lived because Beverly’s Regional Director of Operations continually badgered all area administrators to cut costs even as patient care became compromised under budget constraints.
On one occasion, Ms O’Bradovich was reprimanded for allowing labor hours to go over budget by $400 during a flu outbreak even though with the extra help they were able to contain the outbreak in a few days. “At the time,” she says, “I felt that patient care was vitally more important than saving costs.”
When she first arrived at the facility, she says, there was hardly any regulatory compliance at all. “I literally had to drag the limited amount of existing files,” she recalls, “out of a restroom that had been closed off for storage and that should have been in use for regulatory compliance.”
In her 6 months at the nursing home, Ms O’Bradovich established policies and procedures to bring the facility back into compliance but as she soon found out, that was not Beverly‘s goal. “Patient care improved,” she says, “but the only thing that corporate cared about was saving costs and increasing revenue.”
“We were not losing money at the facility level,” she explains, “but raising the census was difficult as not many people in the community wanted to place their relatives there due to the facility’s negative reputation.”
Throughout the 6 months, she also upset her superiors when she continued to bring up problems such as why they were not properly treating the mold in the building and why they were not fixing the faulty plumbing, until she ended up fired.
Since 2003, Ms O’Bradovich has kept her administrator’s license active but says she has not been able to secure another position as an administrator. “My career has virtually been ruined by my association with Beverly,” she says.
The problem of understaffing at Beverly facilities is legend. A lawsuit recently filed by Attorney Phillip Thomas in a federal court in Mississippi, alleges that understaffing “in Beverly facilities causes the facilities to be dirty, constantly smell of urine and feces, serve as breeding grounds for lice and other problems caused by unsanitary conditions, and to generally deprive residents of a dignified existence.”
The class action lawsuit, filed on behalf of former residents of the nursing home, alleges that Beverly executives maximized profits by failing to provide enough staff for proper care for residents who stayed in the Regional Nursing Center of Bryant in Saline County from December 16, 1998, to June 30, 2004.
The lawsuit alleges that many residents of Beverly facilities require assistance in eating meals due to loss of the use of their hands and understaffing results in there being insufficient caregivers to assist residents in eating causing residents to go hungry and lose weight from starvation.
The complaint alleges that one resident lost 60 to 70 pound in a 6 month period because the staff did not feed her and says the failure to feed the resident was due to understaffing of the facility.
Mr Thomas has come across all kinds of tricks used by Beverly to hide the understaffing of its facilities from government inspectors. For instance, he found that they keep two sets of work schedules; one real and the one that inspectors see which is fake.
The fake schedule, he explains, includes the names of former employees who the facility knows will not be working. But for inspectors looking at the schedule, it appears that the facility is fully staffed. The real schedule shows the facility is not adequately staffed.
According to Mr Thomas, to make the residents easier to manage for understaffed nurses and nurse’s aides, facilities use drugs to sedate residents to make them sleep more.
“Caregivers in understaffed nursing homes need as many residents as possible to be asleep,” he explains, “because there is not sufficient staff to adequately care for all the residents when they are awake.”
“The downside for residents,” he says, “is that it damages their health because they are less likely to get out of bed, ambulate and otherwise move around, which is vital to staying healthy.”
In recent years, Beverly has constantly been under the scrutiny of state and federal investigators for ripping off Medicare and Medicaid. In the most recent case, on April 19, 2006, the LA Times reported that “Beverly Enterprises Inc. has agreed to pay $20 million to settle allegations that it defrauded federal and California healthcare programs,” the Justice Department announced.
This time around Beverly will pay $14.5 million to federal agencies and $5.5 million to California, according to the Times.
Back in 2002, the company settled charges of elderly abuse brought by the California attorney general’s office and paid more than $2 million in penalties and fines and pleaded no contest to felony elder abuse charge involving the death of two patients.
And two years earlier in 2000, Beverly settled a case with the US Department of Justice by paying a $175 million settlement and $5 million fine to resolve civil and criminal charges for defrauding Medicare.