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

On Wednesday, Aug. 11, life at Alta Vista Healthcare, a nursing home in Riverside, started with a break from the usual monotony. That morning, a twentysomething woman in a pantsuit and a young man in shirt sleeves arrived, saying they represented a group called California United for Nursing Home Care. At 10 a.m., one of the young visitors told an Alta Vista supervisor, "It's time to start rolling them out and getting them ready."

For about an hour, orderlies hustled from room to room, rousting patients and pushing them outside until they had gathered two dozen old and disabled people in front of some signs planted in the grass. During the next 45 minutes, people who'd driven to Alta Vista that morning spoke about a looming financial crisis among California nursing homes. Meanwhile, several of the patients' chins drooped to their chests; they seemed to fall asleep in the heat. Some who remained awake complained that they felt parched. Others asked when they would be allowed back inside.

"It was in the low 90s. We're in the high desert, and it's too hot to be outside. Even in the shade, it's warm," says James Bennington, 52, admitted to Alta Vista four years ago to recover from the combined effects of a leg injury, kidney cancer, and skin cancer. "Everybody started getting restless and wanted to go in. Everybody wanted water."

This scene -- in which lobbyists called local TV and newspaper reporters, commanded orderlies to push nursing home residents into the summer heat for two hours, and handed out scripts to allies whom they'd trucked in to speak at a prefab "rally" -- repeated itself more than 100 times around California that Wednesday. Organizers called the events "nursing home funding crisis drills."

This was the first step in a carefully orchestrated lobbying blitzkrieg designed to coincide with the last two weeks of the state legislative session, a period when the cynicism and ingenuity of interest groups become unusually acute. In this case, the corporate owners of nursing home chains and the Service Employees International Union were the ingenious, acute ones.

In the days before Aug. 31 -- the deadline by which the year's bills must be voted on -- legislation favored by interest groups, Democratic and Republican alike, is rushed through the Senate and Assembly with very little public scrutiny.

One method for accomplishing this surreptitious lawmaking is called "gut and amend." The process is just as brutal as it sounds. Lawmakers take a bill that has already passed committee and other public reviews and erase its contents, then insert entirely new legislation in its empty shell. In this sleazy way, legislative leaders are able to ram bills favored by the state's most lavish campaign contributors into law before noxious elements come to light. This legerdemain is accomplished under the pretext of urgency; there's just no time for the democratic trappings of public hearings during the Legislature's hectic final hours, gut-and-amend practitioners say.

The gutted, amended bill related to the 100 bogus nursing home rallies staged earlier this month is a particularly vile example of this gambit.

The bill was written by an alliance between California's for-profit nursing home industry and the Service Employees International Union; the alliance describes the legislation as a way to raise state reimbursements paid to nursing homes that increase staffing and improve care. Nursing homes currently receive $118 per patient from the state Medi-Cal system, regardless of patient need or the quality of care given at a particular facility. Under Assembly Bill 1629, state payments would be based on facilities' actual expenses, rather than a mere head count, according to its backers. State and federal payments to homes could increase by $138,400,000 this year under the plan. The bill also permits Medi-Cal rates to climb by 10 percent in fiscal year 2005-2006 and then an additional 7 percent each year for the next three years. The bill would require the state to pay nursing homes for improving their facilities.

The bill would fundamentally transform the Medi-Cal payment system from one that pays for care on a per-patient basis to one that would estimate nursing homes' expenses, then add a profit of 5 percent, along the lines of systems used to set rates for public utilities such as PG&E, or to pay military contractors such as Halliburton. In this way, AB 1629 would make California the first state in the nation guaranteeing nursing home profits.

But because the bill has been rammed through the Legislature in a matter of days, without time for official analysis, it is unclear how much it would actually cost, or how effective it would be in inducing nursing homes to improve staffing, care, or facilities. Experts who have analyzed the bill say it appears specifically geared to avoid language that would require staffing increases, or that would ensure facilities receiving extra funds actually comply with state laws governing standards of care.

To help fund the bill's provisions, nursing homes would be required to make a per-bed payment to the state. Thanks to the per-bed fee and additional federal funding the bill asks the state to apply for, the nursing home industry claims the bill would be "revenue neutral" -- that's to say, free of charge to state taxpayers. But a researcher who specializes in nursing homes and who has analyzed the bill told me it's actually a California budget buster. It could cost an additional 3 billion tax dollars, just over the next five years, without any requirement that the money be used to provide better care for patients, she said.

"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.

Lisa Hubbard, a spokeswoman for the alliance between the SEIU and the nursing home industry, refused to comment for this column; in an earlier discussion, Hubbard said the alliance would not pursue tort reform "this year." An SEIU lobbyist did not return my call. A spokeswoman for Burton's office referred me to a staffer, who did not respond to requests for an interview.

An SEIU lobbyist did spell out details of the union's agreement with the nursing home industry in a recent e-mail message sent to disability advocates. The memo suggested that this week's $3 billion Medi-Cal bill is part of a multistep package, the ultimate aim of which is the trade in which nursing homes get limits on legal liability and the SEIU gets new members from the ranks of nursing home workers.

"These providers have agreed to remain neutral when workers at their facilities choose to form a union. This neutrality agreement is conditional on the gradual implementation of the full range of nursing home reforms," wrote the SEIU's Mark Polit three weeks ago in an e-mail that defended the union's work lobbying to limit elderly patients' right to sue.

The aforementioned "full range" of reforms began with this week's gut-and-amend bill. While the SEIU/nursing home industry "alliance" has not specifically laid out its lobbying plans, tort reform opponents such as the AARP and California Advocates for Nursing Home Reform say they have every expectation that the union will support such legislation next year.

By then, thanks to term limits, John Burton will have retired. You can bet he won't be in a nursing home.

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