Nursing homes received millions while cutting staff, wages

California's nursing homes have received $880 million in additional funding from a 2004 state law designed to help hire more caregivers and boost wages.

But 232 homes did just the opposite. They either cut staff, paid lower wages or let caregiver levels slip below a state-mandated minimum, a California Watch investigation has found.

The homes that made these cuts collected about $236 million through 2008, the last year of available data. That's more than a quarter of the total Medi-Cal funding increase shared by the state's nursing homes. But the law that made the extra money possible included few safeguards to ensure that patient care improved.

Many nursing homes appeared to use the cash infusion to help bolster their bottom lines, according to a California Watch analysis of state nursing home data. Among the 131 homes that cut staff by 2008, the median profit was 35 percent more than other homes in the analysis.

Graphic by The OC Register

At the same time, the analysis shows, about two dozen homes that made the deepest caregiver cuts had about one-third more deficiencies than other state facilities. State inspectors noted a litany of violations that included neglecting bedsores and giving patients the wrong drugs.

"There was an implicit good faith agreement that things would get better … and that was broken," said state Sen. Elaine Alquist, D-Santa Clara, chairwoman of the Senate Health Committee. "It was broken for the people of California and for a very vulnerable population – those that need the greatest care and those that can't advocate for themselves."

James Gomez, the chief executive of the state's nursing home trade organization, said the 2004 law has led to a 6 percent increase in staffing rates for the state's 1,100 nursing homes and an overall decline in turnover among caregivers – from 54 percent to 47 percent. California's homes now exceed the national average for meeting the staffing minimum, Gomez added.

"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."

Of the homes that cut staffing, 13 owned by Orange County-based Covenant Care stand out. The homes pared caregivers even as they got $15 million in additional funding.

The average profit at those 13 homes reached more than $900,000 in 2008 – three times higher than the remaining 632 homes analyzed by California Watch.

The chain's chief operating officer testified last year in a deposition that part of the company's business plan called for housing more medically fragile patients. The strategy opens the door to higher reimbursements, according to critics, who say it can be dangerous to combine lower staffing rates with patients who need more attention.

Patients such as Charles McGrew.

The Texas-born janitor was admitted to the chain's Long Beach home, Royal Care Center, in early 2006.

McGrew, a diabetic with high blood pressure and a history of infections, began to develop pressure sores on his ankles and tailbone at the home. But little was done to help him, according to court records filed by his family.

Meredith McGrew, 24, said one sore was like a hole in his father's back. Seeing it pained the younger McGrew, who remembers his father as a meticulously neat man.

"My family took it really hard," McGrew said. "My father was the one who looked out for a lot of them and raised them, so they were devastated by the care he was getting."

McGrew's left leg needed to be amputated due to one sore, the family alleged. He died three years ago at age 70. His family blamed his death on mistreatment. Attorneys for Covenant said the family failed to prove that the facility caused McGrew's problems. The case was settled and the terms are confidential.

Since his death, the home's staffing level sank below the state-mandated staffing minimum set in 2000. Royal Care's total profits, though, reached $540,000 in 2008 alone.

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. Around the same time, a family trust associated with the company's CEO Robert Levin paid $4.76 million to purchase an Irvine estate, complete with a theater and outdoor living room.

Levin would not comment about funding and staffing levels for this story. He asked in January for questions to be sent to him in writing, but he did not respond to the written questions or several follow-up phone calls. When finally reached by a reporter late last month, Levin again declined to comment.

The funding increases for nursing homes were made possible by the 2004 law that helped the state draw more money out of Washington, D.C., gradually boosting government spending from $3 billion in 2004 to nearly $4 billion in 2008.

The infusion of state and federal money has done nothing to slow the pace of violations and complaints.

State regulators documented nearly 1,000 deficiencies for inadequate care in 2008, a 65 percent increase compared to 2005.

Regulators maintain that the state hired more inspectors, which may account for the increase. But that doesn't explain the 23 percent rise in complaints filed by patients, advocates or their families.

In 2004, before the law was enacted, nursing homes registered 4,499 complaints. In 2008, patients, their loved ones and advocates filed 5,549 complaints.

Despite mounting complaints and citations, state officials in charge of carrying out the new law granted nursing homes a powerful weapon to fight claims of inadequate care: more money.

They 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 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. They're directly undermining the whole purpose of the citation and enforcement system."

Intended reform marred by lack of oversight

The Nursing Home Quality Care Act of 2004 was designed to fix a glaring problem: Daily Medi-Cal rates paid to nursing homes in California were among the lowest in the nation.

An alliance of labor leaders and nursing home owners came up with a plan that wiped out a flat-fee system and replaced it with one that reimbursed nursing homes based on their costs.

The system allowed nursing homes to boost the amount of matching funds they got from the federal government. The homes first pay a fee to trigger the matching funds and additional revenues.

Not all homes benefited as much as others. Some homes even lost money, especially ones that serve fewer Medi-Cal patients. But most of the state's homes analyzed by California Watch drew a windfall of new money.

Homes could spend the new money on a variety of services. But reimbursement rates increased if they spent the money on labor. Homes also got additional bonuses meant to boost hiring and wages.

Patient advocacy groups cried foul over the added payment, noting the nursing homes could ultimately spend it any way they wanted. And some advocates bristled over the lack of get-tough measures in the proposal. 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 the Department of Health Services to "reward quality care."

"We are making this investment in nursing facilities to ensure better care, and I intend to hold the industry and caregivers accountable for this critical responsibility," Schwarzenegger's 2004 signing statement said.

Despite the governor's directive, the Schwarzenegger administration failed to follow through.

Instead, California Watch found, state regulators lavished new money on homes where findings of lax care mounted, where administrators failed to pay fines for poor care, and where corporate executives cut staff in California and expanded chains elsewhere.

The governor's office declined to comment for this story, referring questions instead to agency officials.

Toby Douglas, chief deputy director for health care programs at the Department of Health Care Services, said that most of the state's nursing homes have invested more heavily in caregivers. His office repeatedly attempted to route questions about nursing home accountability to another state agency that inspects the homes.

While Douglas' agency sets rates and reimburses nursing homes, a second agency, the Department of Public Health, issues and collects fines for substandard care. Even if one agency cites a home for egregious and repeated violations, the other agency may reward it with more funding.

"Our responsibility is to develop a rate method that tries to meet the goals the governor laid out in his signing message," Douglas said. "That means we have to set a methodology and hold that methodology accountable. In that area, yes, we believe we're doing a good job."

Douglas said the governor's office has "made it clear that [the funding law] could be improved" by linking nursing home pay to factors such as patient satisfaction, reduction of bed sores or payment of fines for inadequate care. His department is in the "very preliminary" stages of creating such a system, Douglas said.

The effort comes too late, though, according to some advocates. They question whether the state missed a rare opportunity to use the funds to drive systemic improvement.

"Money talks, we know that," said Molly Davies, director of the nonprofit Wise & Healthy Aging, the Los Angeles elder care ombudsman program. "If you're going to give extra money, there needs to be an understanding of what the state is going to get in return and what those clients are going to get in return. I don't think that was made clear."

The revenue increases to nursing homes were not renewed last year due to opposition from patient advocates, but nursing home executives have been pushing to restore the funding. Alquist, the state senator who heads the health committee, says the law will be scrutinized during a scheduled legislative review this year.

Staffing lags, patients suffer

The Golden State has about 1,100 licensed nursing homes that each year care for an estimated 100,000 people – including the elderly, disabled and those recovering from surgery.

Cindy Yamanaka, The Orange County RegisterPatricia Miller and her three sisters are suing
a home owned by Covenant Care alleging that
the home failed to administer adequate care
to their father.

California Watch reviewed financial and staffing data for the 645 nursing homes, that serve the largest number of low-income Medi-Cal patients who need 24-hour care. The 2004 law was set up to benefit these homes the most.

Of that group, 232 homes either cut staffing or wages or fell below the statewide staffing minimum – even as they received more money from Medi-Cal. The analysis found that 27 other homes fell behind in wages and staffing but saw a reduction in funding.

Since the legislation was enacted, the California Department of Health Care Services gave the 645 homes analyzed by California Watch a total funding increase of nearly 25 percent over five years.

But the lowest-paid workers who perform the vast majority of the patient care in nursing homes did not see that kind of raise. Only 76 homes in the state gave nursing assistants a 25 percent pay increase. Adjusting for inflation, average wages in more than 400 homes went down, the California Watch analysis shows.

In 2008, dozens of homes also operated beneath the decade-old staffing standard – which is set at three hours and 12 minutes of caregiver attention a day for every nursing home patient.

In the homes where staffing lagged, some patients suffered.

Staffing at Cloverdale Healthcare Center in Sonoma County was down 8 percent in 2008 compared to 2004, despite the home's $1 million increase in state funds. Regulators found problems there in the beginning of 2009, including one patient who had been left wearing a dirty diaper for five hours.

Cloverdale officials did not return calls seeking comment.

Gomez, of the California Association of Health Facilities, said the state should aggressively investigate the homes that operated in 2008 with staffing levels below the state standard.

"I don't have an issue with them looking at those facilities today," Gomez said of the 68 homes below the nursing-hour minimum. "That would be the right thing to do."

The state, however, has not issued staffing-related fines to any of the homes that failed throughout 2008 to reach the minimum staffing level, records show.

Wages rise, but problems persist

Applewood Care Center, a small nursing home in Sacramento, collected an additional $575,000 between 2004 and 2008. But during that same time, Applewood's ratio of staff to patients dropped 10 percent.

As the money started to flow, Applewood got hit with two serious citations – the first time as a result of lapses in care in the case of Earley Woods.

The 84-year-old grandmother had slipped away into the dark undetected, state regulators concluded. She steered her wheelchair out the backdoor of the nursing home at night, accidentally crashing down a 54-inch flight of concrete stairs in September 2005. Her skull was smashed, her collarbone broken, her wrist was fractured.

About a half-hour passed before Woods was discovered still strapped to her chair which lay atop her. She was taken to the hospital.

Her daughter, Elaine Parham, had just minutes to absorb the shock of seeing her mother, bloody and bruised, before saying her final goodbye.

"This really can't happen to anyone else," Parham said in an interview.

Terry Bane, the chief executive of the management company that operates Applewood, said Woods' death was a "tragic, tragic incident."

"It … affected the employees in that building in a big way," Bane said.

Applewood was fined $100,000 after Woods died. The facility pledged to upgrade alarms on doors and improve lighting around the building. It also gave pay increases to nurses, which helped lower the staff turnover rate.

But problems persisted.

In late 2006, one patient was taken to the emergency room for dehydration. Eleven days later, the same 89-year-old woman was sent back to the hospital with "very severe dehydration," a citation report says.

Several months later, state regulators concluded that the facility did not try hard enough to save a man who died of asphyxiation after food got lodged in his airway.

Regulators cited Applewood $20,000 in the dehydration case and $100,000 for causing the man's death.

State pays to overturn its own fines

When homes are cited with serious violations, the 2004 state law helps bail them out.

Homes are allowed to bill for administrative costs such as legal fees. That means facilities can charge the state to fight state-issued fines and citations for substandard care.

Advocates say that by doing so, the state undercuts its own efforts to hold homes accountable for lax practices.

"It's absolutely scandalous that this goes on," said Tippy Irwin, executive director of Ombudsman Services of San Mateo County. "That's a gross misuse of state spending."

State officials also pay legal fees for homes that fight audit findings they oppose. Officials could not identify exactly how much they spent reimbursing nursing homes to fight audit disputes or penalties.

But records show that since the 2004 law passed, nursing homes are challenging twice as many citations. Homes challenged 110 citations in 2005 and more than 220 in 2008, records provided by the Department of Public Health show.

"In this fiscal environment, where the state has no money and all of this is coming out of the taxpayers' pocket, yours and mine and everyone else's – this is really unconscionable," said Alquist, the state senator.

David GrossGary Davis is angry that the nursing home where
his stepfather, Harold Shreifels, died was able
to use state funding to fight a citation for
Schreifels' death.

The arrangement worked in the favor of a small nursing home in San Jose. The owner of Homewood Care Center 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. That morning, Harold Schreifels, 67, cried out for help and asked for an ambulance, records show. Staff noted that the diabetic man's blood sugar was dangerously low.

Yet they ignored their policy to notify a doctor about his condition and dismissed his plea, enforcing a 15-hour fast before a routine surgery.

Schreifels, who enjoyed daily visits from his wife and outings to his grandchildren's sporting events, never made it. He died an hour before he was to meet his family at the hospital.

"Harold, he had plenty of life in him," said his stepson, Gary Davis. "If he hadn't been getting surgery that day he had probably wanted to go see a ball game."

State regulators cited and fined the home for missing multiple chances to call a doctor or to help Schreifels.

The home's owner, Jack Easterday, acknowledged in an interview with California Watch that Schreifel's death might have been avoided if the staff had used an IV to give the man nutrients in the hours before his death.

A mediator discounted the fine $95,000 even though no one disputed that Schreifels' death could have been prevented.

The state helped pay his legal fees, Easterday said, but he described the state's contribution as "miniscule." The state was unable to determine the amount it paid.

Easterday spoke with California Watch at his Oakland office in January, one week before he went to federal prison to serve a 30-month sentence for tax evasion. He was convicted in 2007 of failing to pay the IRS payroll taxes for his eight nursing homes but remained free until he exhausted his appeals, which were ultimately rejected by the U.S. Supreme Court.

Davis, whose family did not file a lawsuit over his stepfather's death, said he could not believe that 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?"