Gutted

How the nursing home industry, organized labor, John Burton, and Arnold Schwarzenegger are cooperating to guarantee giant health care corporations huge profits -- using billions of your dollars

"It doesn't require any changes by the industry as far as meeting staffing requirements or other state laws," says Charlene Harrington, a University of California at San Francisco researcher who has studied nursing home finance for 15 years. "We could be spending $3 billion over five years and get nothing."

Harrington spent hours studying the bill's text to identify its flaws, but outward signs that there might be surprises in the fine print were easy to spot:

The bill was introduced mere hours after nursing home owners and workers conspired to push hundreds of frail patients to languish in Central Valley heat to create the illusion of popular support.

The bill was co-authored and rapidly ushered through the Senate Rules Committee last week by state Senate President Pro Tem John Burton.

It was considered after a last-minute announcement at the Senate's Health and Human Services Committee last week, in a brief hearing that didn't permit opponents to voice concerns.

Officials at the California Department of Health and Human Services have quietly supported the bill, even though Gov. Schwarzenegger said earlier this month he would veto gut-and-amend bills.

Michael Moreno, a lobbyist with the AARP, the group formerly known as the American Association of Retired Persons, says his group opposes the bill because it contains no language that would guarantee patient rights or an improvement in patient care as nursing home subsidies skyrocketed. But Moreno has a succinct description of its legislative prospects: "It's greased."


It's entirely appropriate that John Burton would baste such a budget-busting turkey during gut-and-amend week, the Legislature's version of holiday season. This is a time when the artifices of animosity that for the rest of the year divide Democrats and Republicans -- and separate liberal interest groups from business-friendly ones -- subside amid the desire to loot the public till.

If this is happy season for interest groups and the Democratic and Republican lawmakers they've put in office, it's vile for the rest of us. Prior to AB 1629, the hallmark of budget-busting gut-and-amend bills was a $931 million tax cut approved in 1997, during a midnight round of negotiations among Democrats, Republicans, and then-Gov. Pete Wilson. Tax cuts can sometimes be a good thing. But was a huge tax reduction wise during the lean Wilson budget years? This question didn't air outside Sacramento, as there was almost no public discussion of the politicians' maneuvers, the Los Angeles Times reported.

As bad as the 1997 tax cut may have been, AB 1629 is worse.

For starters, the bill claims to solve a nursing home financial crisis that doesn't exist. Financial statements filed with the Securities and Exchange Commission show nursing conglomerates operating in California are highly profitable and growing. Meanwhile, there is a different and very real crisis among California nursing homes that this bill does nothing to address -- financial flimflammery. Researchers have documented numerous cases in which nursing home conglomerates have used accounting trickery to divert public subsidies away from patient care and into their subsidiaries, where the money turns up as profits. These companies' nursing homes, meanwhile, remain ghoulish, penny-pinching institutions where patients die from bedsores, improper medication, and other avoidable ailments, while the owners skimp on staffing and training -- and transfer huge profits to other firms.

"They're supposed to spend so much on direct-care costs. So they put inflated costs in the administrative component, or inflated costs in capital cost. There are no penalties for outfits that game the system and put in fraudulent cost reports," says Pat McGinnis, executive director of California Advocates for Nursing Home Reform.

This sort of fund diversion is a major concern, says Harrington, the UCSF researcher specializing in nursing home finance. "It's very complicated to write legislation to make sure those kinds of things don't happen," she says. "Right now I don't see that the bill has controls built into it that would control it."


The gut-and-amend bill to increase nursing home subsidies is the product of an unholy lobbying alliance between the nursing home industry and the SEIU; it's called California United for Nursing Home Care. The ultimate aim of the alliance is a swap: better access for organizers wishing to recruit union members at nursing homes for SEIU's support of laws designed to bolster nursing home profits. Among such laws are this week's $3 billion Medi-Cal bill and legislation, expected to be submitted next year, that would make it harder for patients or families of patients who've been abused, maimed, or killed in nursing homes to sue.

If everything went according to the SEIU/nursing home industry plan, "reforms" aimed at limiting patient lawsuits would have been quietly slipped into this year's massive state budget bill. But the union and its health care corporation allies adapted that plan after an article in SF Weekly earlier this summer revealed the "tort reform" component of the nursing home "reforms."

Close observers of the situation now believe nursing homes and the SEIU have revised their strategy, going about the reforms in a two-step process. First on the legislative agenda is rate reform, the name given this week's $3 billion Medi-Cal bill. Next year, the observers say, the nursing homes and the SEIU plan to cooperate in attempting to pass "tort reform," the term used for limiting patients' right to sue.

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