California's nursing homes have reaped $880 million in additional funding from a 2004 state law designed to help them hire more caregivers and boost wages.
But about a quarter of the state's homes flouted the law's purpose. They cut staff or slashed wages, while padding their bottom lines, a California Watch investigation has found.
The 232 homes that made those cuts — including 20 in Santa Clara and San Mateo counties — collected about $236 million through 2008, the last year of available data. And the law that made it all possible included few safeguards to ensure it was spent as intended.
About two dozen homes that made the deepest caregiver cuts had about a third more deficiencies than other state facilities, California Watch found. Violations ranged from neglecting bedsores to giving patients the wrong drugs.
Overall, regulators documented nearly 1,000 deficiencies for inadequate care in California nursing homes in 2008 — a 65 percent increase compared with 2005.
"There was an implicit good faith agreement that things would get better "... and that was broken," said state Sen. Elaine Alquist, D-San Jose, chairwoman of the Senate Health Committee.
But James Gomez, chief executive of the state's nursing home trade organization, said the 2004 law has led to a 6 percent increase in average staffing for nursing homes.
"Is it working in every facility every day? No," said Gomez, leader of the California Association of Health Facilities. "But is it working in total? Absolutely."Chain's profits Of the homes that made cuts, 13 owned by Orange County-based Covenant Care stand out.
Thanks to $15 million in new funding, profits at those homes averaged more than $900,000 in 2008 — far higher than the average for the remaining 632 homes California Watch analyzed. Four of those Covenant Care homes are among the six it operates in Santa Clara County.
The chain's chief operating officer has said part of its business plan calls for housing more medically fragile patients. The tactic opens the door to higher government reimbursements, according to critics, who say it can be dangerous to combine lower staffing rates with patients who need more attention.
Patients like Raymond Yniguez.
The 78-year-old Gilroy man went to the chain's Morgan Hill home, Pacific Hills Manor, on Feb. 6, 2008, to recover from spinal surgery. Three weeks later, he fell and hit his head, but the staff sent him home that afternoon. Two days after his release, Yniguez died of a massive brain hemorrhage.
Yniguez's widow has sued Pacific Hills Manor, alleging wrongful death, medical negligence and elder neglect or abuse. Robert Bohn, her lawyer, said the home's staff knew Yniguez was at high risk of falling. But after finding him on the floor with a large bump on his cheek, they spoke with a doctor by phone, Bohn said, then released Yniguez without having him seen by a physician.
"The problem with these nursing homes is they're all understaffed," Bohn said.
Records show a 7 percent decline in staffing levels at Pacific Hills Manor from 2004 to 2008.
Covenant Care lawyer John Supple defended the home's conduct, noting the Yniguez incident did not lead to a state citation. Supple said the staff checked on Yniguez throughout the day and released him under guidance from his doctor.
The Covenant Care chain, meanwhile, rewarded top administrators and nursing supervisors with bonuses based, in part, on how much profit each home generated, records show. CEO Robert Levin declined repeated requests to be interviewed about the company's staffing levels.
Oversight lacking
The Nursing Home Quality Care Act of 2004 was designed to fix a glaring problem: Daily Medi-Cal rates paid to California's 1,100 homes were among the lowest in the nation.
An alliance of labor leaders and nursing home owners pushed to replace a flat fee-per-patient system with one that reimbursed homes based on their costs.
Some patient advocacy groups and experts bristled over the proposal's lack of teeth. The California AARP ran full-page newspaper ads that said, "No blank check for bad nursing homes."
Still, the bill flew through the Legislature. When Gov. Arnold Schwarzenegger signed it, he directed regulators to "closely monitor implementation" and "reward quality care."
But the state agency that oversees nursing home funding failed to follow through.
Toby Douglas, chief deputy director for health care programs at the Department of Health Care Services, conceded that some homes may have cut staff. But he said that most have invested more heavily in caregivers.
Douglas said his department is in the "very preliminary" stages of improving the funding law by linking nursing home pay to factors such as patient satisfaction or payment of fines for poor care.
Yet some advocates question whether the state — now in a budget crisis — missed an opportunity to use the funds to drive improvement.
The revenue increases to nursing homes were suspended last year because of opposition from patient advocates, but homes have been pushing to restore the funding. Alquist, the state senator who heads the health committee, says the law will be scrutinized during a legislative review this year.
Staffing lags
California Watch inspected financial and staffing data for the 645 homes that serve the largest number of Medi-Cal patients who need round-the-clock care. The 2004 law was set up to benefit these homes the most.
Since the legislation was enacted, the Department of Health Care Services rewarded the homes analyzed with a total funding increase of nearly 25 percent.
But the lowest-paid workers, who perform the vast majority of patient care in nursing homes, did not see that kind of raise. Adjusting for inflation, more than 400 homes cut those workers' wages, the California Watch analysis shows.
In 2008, dozens of homes also operated beneath a minimum staffing level set by the state nearly a decade earlier.
Gomez, of the California Association of Health Facilities, said the state should aggressively investigate homes that operated with staffing levels below the standard — which is set at 3.2 hours of caregiver attention a day for every nursing home patient.
"I don't have an issue with them looking at those facilities," he said of the 68 homes below the minimum in 2008.
The state, however, has not issued staffing-related fines to any of the homes that failed to reach the minimum staffing level, records show.
And when homes are cited for serious violations, the 2004 law helps bail them out. For the first time, it allowed homes to bill the state for legal costs spent to fight fines, citations and lawsuits alleging abuse and neglect.
"The policy is outrageous," said Michael Connors, an advocate with watchdog group California Advocates for Nursing Home Reform. "By paying the legal fees of nursing homes that are neglecting and abusing residents, the state is subsidizing their mistreatment."
While state officials could not identify exactly how much they spent reimbursing nursing homes to fight penalties, records show that since the 2004 law passed, homes are challenging twice as many citations. The arrangement worked in the favor of a small home in San Jose, Homewood Care Center. Despite having been convicted of federal tax fraud, its owner used state funds to appeal a $100,000 citation issued by state regulators who, in a settlement, agreed to reduce the fine to $5,000.
The citation was issued in response to the events of Oct. 17, 2006, when Harold Schreifels, 67, died while awaiting surgery to repair a dialysis shunt. Homewood staff had noted that the diabetic man's blood sugar was dangerously low. But despite his pleas, they ignored their policy to notify a doctor about his condition, enforcing a 15-hour fast before surgery. The home's owner, Jack Easterday — who, ironically, was convicted of failing to pay payroll taxes for his eight nursing homes the day the Schreifels fine was announced — acknowledges the death might have been avoided if his staff had given intravenous nutrients. Still, a mediator discounted the fine by $95,000.
Easterday acknowledged the state helped pay his legal fees to fight the fine, but he described the contribution as "minuscule." The state was unable to determine how much it paid.
Gary Davis, Schreifels' stepson, said he could not believe the state stood by the reduced fine.
"The government should be "... corrected for their mistakes also," he said. "They're accountable for their actions, you know?"
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