The Shame of our Nursing Homes
Last July Beverly announced that the Justice Department had launched an investigation into whether the company improperly billed Medicare for labor costs between 1990 and 1997. Two former Beverly employees have been called before a California grand jury, and Blue Cross of California is also reviewing its dealings with the company. Investors reacted angrily to the news. In October Beverly shareholders filed a class-action suit alleging that the company "engaged in a scheme to inflate billings to Medicare" by shifting labor costs at homes that weren't Medicare-certified to those that were.
Beverly says it is cooperating with investigators, but the company is quick to knock the government for its approach to inspections. "We believe the system that regulates nursing homes is punitive, subjective and inequitable," says vice-president Dan Springer. "Rather than the government finding problems, fining facilities and upsetting the lives of good people, why not flip the tables and work in partnership?" He adds that Beverly has devised a "report card" to evaluate its own operations. "There is no arguing that there are places where care needs to be improved. But there are instances where the process as it's implemented today doesn't recognize the positive things that go on in nursing homes."
It's no secret why companies like Beverly see "positive things" in nursing homes: With the number of elderly Americans requiring long-term care projected to reach 14 million by the year 2020, the industry is virtually guranteed a profitable future. As with other public services that have been privatized, however, the question is: What is a reasonable profit, and how can taxpayers insure they're getting their money's worth? Congress has responded to the soaring costs of nursing homes by moving Medicare and other federal programs into managed care, which caps costs at set levels. But lowering costs doesn't automatically improve the quality of care. A new reimbursement plan that took effect on January 1 gives nursing homes a fixed amount for services, then allows them to spend the money however they see fit. "The less you spend, the more you make," says Elma Holder of the Citizens Coalition.
For its part, the industry knows how to use its political and financial clout to block any meaningful reform. In 1978, on a trip to Arkansas to testify about nursing-home abuses, Holder found herself being driven to the airport by an ambitious attorney general named Bill Clinton. "I remember him saying he would never take any money from corporations that ran nursing homes," she recalls. "I was quite impressed with this man, of course, that he would say that." In 1996 Clinton raised $1.1 million from nursing-home owners, including several who attended breakfasts at the White House. The following year, at the President's recommendation, Democrats named Alan Solomont, a Massachusetts nursing-home magnate who lobbied for weaker federal enforcement, the party's new finance chairman.
Beverly has contributed more than $100,000 to federal candidates and their parties since 1995, and its board of directors enjoys high-powered contacts on both sides of the aisle. Republicans on the board include Edith Holiday, the White House Cabinet liaison during the Bush Administration, and Carolyne Davis, who served under President Reagan as administrator of the Health Care Financing Administration, the federal agency responsible for overseeing nursing homes. Democrats include Beryl Anthony, a former US representative and chair of the Democratic Congressional Campaign Committee. The industry also uses its influence to block reforms at the state level. In Beverly's home state of Arkansas an analysis of campaign contributions shows that nursing homes were the second-largest donor to state legislative candidates in 1994.
Given the political clout of companies like Beverly, it's hard to imagine lawmakers getting behind the reform proposals advocated for years by patients and their families. But with the cost of long-term care skyrocketing, some officials are starting to listen. Advocates say more money should be directed at keeping people out of nursing homes--by providing adult daycare, home health aides and other community-based programs that keep people healthy and independent. They also point to model facilities, like the nonprofit Hampton Woods in rural North Carolina or the state-run Benton Services Center in Arkansas, that invest in providing top-flight nursing care rather than maximizing profits.
The most promising reform efforts focus on the most direct and effective way to improve care: Require homes that rely on public funds to hire more nurses and aides. Advocates in sixteen states have convinced lawmakers to introduce measures that would raise minimum staffing levels, forcing homes to provide at least four hours of direct care each day. It's a seemingly simple idea, but it strikes at the heart of industry profits. Nursing homes would have to spend tax dollars directly on care rather than funneling money into lucrative sidelines. "It's the most serious issue we face," says Holder of the Citizens Coalition. "Common sense would tell you that you can't achieve good care if you don't have enough staffing, but no one wants to talk about it because of the cost involved."