Human Services Committee

JOINT FAVORABLE REPORT

Bill No.:

HB-5051

Title:

AN ACT IMPROVING TRANSPARENCY OF NURSING HOME OPERATIONS.

Vote Date:

3/18/2014

Vote Action:

Joint Favorable Substitute

PH Date:

2/20/2014

File No.:

SPONSORS OF BILL:

REP. SHARKEY, 88th Dist.

REP. ARESIMOWICZ, 30th Dist.

SEN. WILLIAMS, 30th Dist.

SEN. LOONEY, 11th Dist.

REASONS FOR BILL:

To encourage transparency in financial reporting by all nursing homes. The original bill required all nursing homes to report to DSS profit and loss statements from related parties and wage and benefit detail and waived liability for state for failure to follow entire rate-setting statute. The substitute language eliminates wage and benefit reporting requirement and requires only for-profit homes to file related party data and limits waiver liability to subsection concerning nursing home rates.

RESPONSE FROM ADMINISTRATION/AGENCY:

BENJAMIN BARNES, Secretary, Office of Policy and Management, testified in support of this bill, stating, “The bill promotes greater transparency in the cost reports filed annually by nursing homes with DSS. The state has a critical interest in transparency in order to afford access to information for consumers, protect the rights and interests of nursing home residents, their families, and their caretakers; and make wise use of the more than $1.6 billion the state invests annually in nursing home care.

He explained that DSS would have no requirement to do review or assess the information reported, rather just have it on hand and available in the case of facility closure or rate adjustment.

Secretary Barnes added that his office feels that reporting by both non-profit and for-profit homes would be “a more equitable approach.” He also testified in support of the section protecting DSS from “action or liability arising for failure to comply with provisions of the bill.”

RODERICK L. BREMBY, Commissioner, Department of Social Services, testified, “This bill requires that any chronic and convalescent nursing facility that receives state Medicaid funding shall submit, as an addendum to annual cost reports, a profit and loss statement from each related party that receives more than $10,000 a year for goods and services.”

The department supports this legislation and feels that it will provide valuable information for assessing the overall health and financial stability of nursing facilities.”

He specifically testified to the importance of direct care staff information as it could be used as the department “explores moving to an acuity-based methodology.” Under this model, facilities that are providing more acute care will be reimbursed at a higher rate to compensate for the intense level of care. The expertise level, as well as the number of hours being committed to the care, directly relates to the acuity level in that advanced level of care requires a more skilled workforce.” (The section requiring direct care staff information was removed from the substitute bill).

NANCY SHAFFER, Connecticut State Long Term Care Ombudsman, submitted testimony in support of this bill, “The objective of both of these bills is to enhance transparency of the cost reports filed by nursing home operators to the Department of Social Services. There are considerable requirements to the current cost reports. Over the years however the business model of the nursing home industry has evolved and the further reporting requirements will provide a more detailed accounting of the actual related business costs.

“Connecticut has experienced multiple nursing home bankruptcies, receiverships and closures in the past eight years at significant costs to the State.” She continued, “Residents and their families are left for months, sometimes years, worried about the homes they live in and the people caring for them. In some of these situations residents were transferred more than once when they left the original bankrupt/closing home and then, after settling into their new home, were again uprooted when that home declared bankruptcy or went into state receivership and closed. More transparency in the required cost reports will provide the State and consumers with more complete information, providing the basis for informed decision making.”

DEB MIGNEAULT, Senior Policy Analyst, Connecticut's Legislative Commission on Aging, testified in support of this bill which would, “promote greater transparency in nursing facility annual cost reports submitted to the Department of Social Services.

She further testified that this bill would, “provide greater transparency to the public and state agencies about the actual costs of goods and services of for-profit nursing facilities as well as unrelated payments of nursing home providers.

“Connecticut experiences numerous cases of receivership, closures and bankruptcies of nursing homes at any given time.” She went on to say that this bill would “provide the state with access to financial information which will enhance oversight of these entities, especially when nursing homes may be evidencing signs of problems with resource allocation.”

NATURE AND SOURCES OF SUPPORT:

DEBORAH CHERNOFF, Director of Public Policy, District 1199/SEIU Healthcare, United for Quality Care, testified in support of this bill, stating, “Nursing home operators pay out hundreds of millions of dollars to 'related parties' for goods and services such as rent or lease payments, management services, pharmaceuticals, medical supplies/equipment, therapy services and temporary personnel.

“The protracted legal and labor dispute involving HealthBridge Management provides clear evidence of the need for greater transparency from nursing home corporations.”

She also testified, “If a nursing home submits an application with DSS for a Certificate of Need to terminate services, based largely on the facility's assertion that it is not financially viable, DSS does not currently have access to important information necessary to make the right decision on a matter of such deep public concern and serious consequence as closing a nursing home. Many individual nursing homes report significant losses in a given year while expending millions of dollars in payments to other, related businesses.”

Ms. Chernoff testified that the financial data required on cost reports is no longer sufficient considering the radical changes in the nursing home industry, such as an increase in “larger corporate, for-profit regional or national chains.” Because related businesses are privately held, DSS has no access to profit/loss information for those related companies.

VERN SCATLIFFE, CNA, District 1199, testified in support of the bill, explaining that, after HealthBridge chose to change union contracts, cutting hours, wages, and benefits, without completing negotiations. But efforts to enforce injunctions on HealthBridge, requiring them to resume negotiations, were thwarted when HealthBridge filed bankruptcy for the nursing homes, while continuing to pay tens of millions of dollars to related, private companies.

“We have to remember that almost all of the money HealthBridge takes in – including the millions they pay to themselves through their related companies – is public taxpayer money that comes from Medicaid and Medicare.”

YVONNE FOSTER, CNA, Member, New England Health Care Employees Union, Dist. 1199, testified in support of HB 5051, stating, “My nursing home is part of the Kindred chain, one of the bigger health care corporations in the country, Kindred operates 102 nursing homes, with 5 in CT. Like a lot of other big nursing home chains, Kindred pays millions of dollars to related party companies for goods and services for its nursing homes in Connecticut.

She illustrated the reason for the bill , saying, “For example, in 2011, the 5 Kindred nursing homes in CT together paid about $6.5 million dollars to “People First,” a rehab therapy company and to Kindred Healthcare Home Office Costs. Almost all of that came from public Medicaid and Medicare dollars- that means that some of my tax dollars and yours are going to Kindred's corporate headquarters in Kentucky.”

She stated that in order to truly understand whether a nursing facility is in distress, there must be more information available about related companies and their profits from the nursing homes.

NATURE AND SOURCES OF OPPOSITION:

MATTHEW V. BARRETT, Executive Vice President, Connecticut Association of Health Care Facilities (CAHCF), testified that he is in opposition of HB 5051, citing that, “This legislation is harmful because it imposes burdensome requirements on all nursing homes without reason. The information has no bearing on the setting of Medicaid rates or relevance to any other component of the rate-setting process, audit process or certificate of need process.”

His testimony also recorded his opposition to “provisions regarding reports of wage and benefit information.” However, this section was removed from the bill.

He also objects to the inclusion of for-profit nursing homes, but not non-profit nursing homes. Similarly, he feels that nursing homes have been singled out when providers of care such as hospitals, group homes and clinics use the same cost report filings for rate-setting.

“With regard to related party transactions federal law states that 'costs applicable to services, facilities, and supplies furnished to the provider by organizations related to the provider by common ownership or control are includable in the allowable costs of the provider at the cost to the related organization. He feels that the cost report already requires the reporting of information that “discloses whether or not and to what extent there was a profit or loss associated with each related party transaction.

“Further, federal law already requires extensive reporting of ownership and control information by nursing facilities. In addition to already existing requirements for disclosure of ownership and control information under federal regulations, the transparency which require reporting of any person or entity with any operational, financial or managerial control over a nursing facility or who provides policies and procedures to the facility or who has any financial interest in the real property, whether through direct or indirect ownership or as a holder of a mortgage or security interest.”

He lists the information that nursing homes must include:

1) Anyone with direct or indirect ownership of 5% or more

2) Officers, directors, partners

3) Managing employees

4) Name of any person/entity owning a mortgage, deed of trust, note or obligation secured by the facility or property of the facility

5) Identity of each member of the governing body

6) The organizational structure of any “additional disclosable party” and relationship to the facility. Additional disclosable party is defined as any person or entity who:

a) Exercises operational, financial or managerial control over all or part of a facility or provides policies and procedures or financial and cash management services

b) Leases or subleases property to the facility or owns a whole or part interest of at least 5% of the value of the real property or

c) Provides management or administrative services, management or clinical consulting services or accounting or financial services.

MAG MORELLI, President of LeadingAge Connecticut, testified in opposition to this bill, stating, “We question why this additional information is needed by the Department of Social Services and what it will be used for once submitted. The information appears to be of no value to the rate setting system and would have no effect on the rate calculation.”

She testified further that part of the 37 page report submitted annually to the state by every nursing home requires information “regarding payments made to related parties, including information on whether the related party.”

She cites some concerns about the information requested, including the time and cost associated with gathering and submitting the information and the fact that the information would be made public through FOI once submitted.

Her testimony also records her objection to the immunity given to the state against any legal action brought in relation to the nursing home rate setting statute 17b-340.

Connecticut Trial Lawyers Association, provided testimony in opposition to section 2 of this bill, stating, “While the CTLA applauds the underlying purpose of the bill, we feel that it is unnecessary and against public policy to include the actions in C.G.S. Section 17b-340 in the immunity provision found in section 4-165c.” This section of the bill removes the liability of the state in grievances relating to the rate-setting statute.

Reported by: Darya Pneva/Kristen Traini

Date: 3/25/14