Lee Zurik Investigation: Are nursing homes buying state policy?

Updated: Nov. 8, 2013 at 3:15 AM CST
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Empty beds, empty rooms, cost Louisiana taxpayers millions. State leaders don't want to elaborate how, and why, they've paid as much as $23 million a year for thousands of unused beds.

"They don't like to talk about it," says Bruce Blaney, a consultant with the Supported Living Network. "It's so sad."

In 2010, Louisiana had 9,000 empty beds in nursing homes. At a legislative hearing that year, a lawmaker told a House committee how much it cost the state.

"$23,191,688 last year went to unused beds in nursing homes," said Rep. Walker Hines of New Orleans.

Nursing homes are big business in Louisiana. Most are for-profit organizations.

"These are private businesses and private businesses should be able to sink or swim," says Jan Moller, director of the Louisiana Budget Project and a former reporter who investigated the nursing home industry for the Times-Picayune. "And if you're paying for empty beds, you're essentially paying somebody for not being as successful, maybe , as they should be in filling those beds. Holiday inn doesn't get paid if they have 30 percent of their rooms empty. But if you're a nursing home, and you run essentially a similar business, then you get paid by the government."

But each year, the state pays nursing homes for empty beds. Last year, 25 percent of the beds sat empty – 8,700 across Louisiana.

Blaney says, "The demand is falling off, and yet the supply is being kept artificially alive."

In 2007, the state's Department of Health and Hospitals sent out a news release in which then-Under-secretary Charles Castille writes, "The Medicaid reimbursement formula includes a payment for empty beds." But since then, the Jindal administration appears hesitant to admit to payments for empty beds.

When we asked DHH last month, they responded, "We don't pay for empty beds."

When we asked the question again and provided more details, including that 2007 news release, DHH clarified, writing, "The rate-setting methodology does include overhead and administrative expenses that indirectly result in some of the cost of empty beds being calculated into the rates."

DHH declined our request for an on camera interview.  But staffers at the governor's office note that nursing home methodology was changed in 2008, when the minimum occupancy level for nursing homes was raised from 70 to 85 percent - "effectually lowering reimbursement for nursing homes with larger numbers of empty beds," accordiong to Jindal spokesman Kyle Plotkin.

When we ask Joe Donchess, executive director of the Louisiana Nursing Home Association, why state taxpayers should have to pay for unused beds, he responds, "Why did the state approve those beds back in the 1980's and 1990's? We built them based on a need… Now that we have a mortgage of 6, 8, 10 million dollars, does that mean you're going to cut us out at the knees and say we're not going to pay you for that anymore? It's a fairness issue."

Bruce Blaney spent six years in the La. Department of Health and Hospitals. Now, he's an advocate for the elderly getting care in their own homes. He says money should follow the patient, not an empty bed – but, he says, it all comes down to money.

"You can buy policy, alas," remarks Blaney. "I mean, these campaign contributions buy a policy. They bought the empty bed policy. "

To know just how big a business nursing homes are around the state, all you need to do is look at a stack of paper, representing four years of their campaign contributions. The industry has come a long way from 1992, when Buddy Roemer left the governor's mansion.

"Awesome," responds the former governor as we show him such a stack. "Well, it's exploded. I guess their dependence on the governor and the legislature is at an all-time high… It's sad."

In the past four years, the nursing home industry has contributed almost $2.8 million to political campaigns, mostly to the governor and state legislators.

"I don't think we're, probably, near the largest," Donchess tells us when we ask about those funds.

But that $2.8 million is more than the oil and gas, telecommunications, gambling, utilities and banking industries have contributed from 2009 through 2012.


"Campaign contributions are just part of the process," says the LNHA head. "People ask us for contributions; we give contributions."

In the last four years, nursing homes have given $715,000 to the governor, $124,000 to state Senator Sherri Cheek Buffington, $100,000 to Senate President John Alario.

Many of the contributions are bundled together on one date or one week. One is example came on October 24, 2012, when nursing homes gave Governor Bobby Jindal $206,000 on one day. Over three days in October of 2011, nursing homes gave Sen. Buffington nearly $64,000. On September 22, 2010, nursing homes gave Rep. Alario $60,000.

In our interview with the head of the state's Nursing Home Association, we found out some of those dates may coincide with fundraisers the association's political action committee hosts for lawmakers, in the association's Baton Rouge headquarters.

"We use our upstairs," explains Donchess. "The PAC will send out requests to members... 'If you'd like to come to a fundraiser, come on by and meet with the legislator.' And if they want to make a contribution, they make a contribution."

Teddy Price is the highest donor among nursing home owners, giving $444,000 over the past four years. That money was given by about 30 different businesses and people, including Price and his wife. Elton Beebe of Ridgeland, Mississippi, his family and businesses gave the second most among nursing homes owners, $303,000.

Once FOX 8 News and Times-Picayune noticed large contributions from the nursing homes, we started digging further. Here's what else we found.


Some nursing home owners who are the highest donors own some of the worst-rated nursing homes in Louisiana.

According to data collected by the U.S. Centers for Medicare and Medicaid Services, Louisiana has the poorest-ranking nursing homes in the country, number 50, ranked right behind Oklahoma, Texas, West Virginia and Georgia.

Presenting our findings to Donchess, he tells us, "I think some of the ratings are based on some, probably, incorrect coding on our part. I don't think many of our members were coding for contract nurse practitioners. And once you see them doing that over the next few quarters, I think we will improve in direct care staff, and what was called 'professional nurses,' which are actually registered nurses. And we still have, I think, one of the highest levels of LPN [licensed practice nurse] coverage in the country."

On a 5-point "Quality Rating" system, implemented by CMS, Louisiana for-profit nursing homes averaged a 2.5 rating. The non-profit homes rated better, an average 3.5.

There's more. Louisiana's laws set a cap for certain fines. For a Class A violation that results in a death or serious injury, the most a nursing home can be fined is $2,500 - for that one incident. So you could have a relative die at a nursing home, the nursing home could be at fault, and the state could only fine them $2,500 for that one incident.

"The state is saying they're not worth much," says Blaney.

These nursing homes are dependent on state money, through the Medicaid program.

"The nursing homes have been a very special case during this budget downturn," notes Moller.

Just compare 2010 and 2011, during heavy budget cuts. Payments to nursing homes went up by $114 million, even though nursing homes populations didn't increase.

"If you ask hospitals, if you ask home care providers, if you ask pharmacists, if you ask anybody else… you know, mental health services," Moller tells us , "everybody has faced some sort of cut, and have had to do more with less, during this downturn. And that hasn't been the case with nursing homes. Their rates have gone up and up, every single year, even though the population in nursing homes has actually been declining for most of the last few years."

The state has been funding nursing homes partly through the Elderly Trust Fund. It was created about 10 years ago and the state was supposed to be spending the interest, not the balance.

That was happening until 2010, when the Jindal administration and the legislature started raiding the fund, spending the interest and also tapping into the fund itself, sending about $100 million a year to the nursing homes.

"Basically it's like paying your mortgage out of your savings account when you've already lost your job," says Moller.

The funds are quickly depleting and are expected to run out around the same time that Jindal leaves office. What happens when it's drained?

"That's a good question," says Donchess.

Critics say the facts in our story lead to one conclusion.

"They're buying legislators and they're buying the administration," insists Blaney.

Blaney says campaign contributions lead to favorable laws and favorable payments, like the millions they say indirectly fund empty beds at nursing homes.

When we ask Donchess if that's the homes' intent with their contributions, he says, "No, I don't think so. Again, we pay campaign contributions to educate legislators, and respond to requests that we get for campaign contributions."

But a former governor says there's a reason nursing homes donate more than the oil and gas industry.

"The government regulates the rate of pay that they get for a nursing home," says Roemer. "So it's a direct correlation."

According to Roemer, this example is one that shows the system needs to change.

“What’s best for them is to have a system where they don’t have to buy politicians, or rent them,” he tells us, “where they can make their case, based on the facts, about the amount of money they should be given for the care of the injured or the aged.”