Out of the spotlight
Pressure eases on private, for-profit nursing homes
Private, for-profit owners of nursing homes are off the hot seat for now, after years of being a target of influential members of Congress who had concerns they may provide lower quality of care. After a series of inquiries dating to 2007, some recent findings of the Government Accountability Office combined with the start of provisions of last year’s Patient Protection and Affordable Care Act are working to quiet much of the chatter surrounding the issue.
The likely lack of action by Congress on the issue may come as a relief to industry providers, who are operating under a Medicare reimbursement cut of 11% that took effect Oct. 1 (Aug. 8, p. 14).
The ownership issue had been raised initially in part because more complicated ownership, which is typical of nursing homes bought by companies who specialize in private equity, was thought to make it harder for residents to take legal action and collect legal judgments, industry experts say.
But the latest GAO report on private investment firm ownership of nursing homes, released publicly in August, included results that in general identified few differences in quality, staffing and profits at nursing homes owned by private-investment firms compared with those owned by other for-profit companies. The private investment firm-owned and other for-profit-owned facilities reported a larger number of total average deficiencies and a greater proportion of homes with a serious deficiency when compared with not-for-profits.
Private investment firm-owned nursing homes had the highest registered-nurse ratio out of the three categories: private-investment firm owned for-profit, other for-profit and not-for-profit. The report is based on data from the CMS’ Online Survey, Certification and Reporting system, or OSCAR, and Medicare skilled nursing facility cost reports.
“I don’t see anything that cries out for congressional action,” says Martha Sweterlitsch, a healthcare attorney for the law firm Benesch in Columbus, Ohio, who generally works with not-for-profit providers. After a certain degree of anticipation that the GAO would produce results showing facilities owned by private-investment firms were different, “the report is kind of boring,” Sweterlitsch says.
The report, titled Nursing Homes: Private Investment Homes Sometimes Differed from Others in Deficiencies, Staffing and Financial Performance, noted in a summary that “although the acquisition of nursing homes by (private investment) firms raised questions about the potential effects on quality of care, GAO’S analysis of data from before and after acquisition did not indicate an increase in the likelihood of serious deficiencies or a decrease in average reported total nurse staffing.”
The GAO’S findings follow a previous report published in September 2010 that outlined the large number of nursing homes purchased by private investment firms. That report found 10 private investment firms were the buyers of 89% of the 1,876 nursing homes changing hands between 1998 and 2008, among other things.
Sweterlitsch says the newer study’s results are not surprising, as they reflect a commonsense strategy for the investment firms. They look for troubled or inefficient nursing home companies, buy them, invest capital to offer higher acuity care, hire professionals who can handle those kind of patients, and then go after patients with a better payer source, she says.
The GAO researchers did find that the private investment firm-owned homes tended to try to rework operations to make them more attractive to higher-paying residents, a point that was not lost on one of the congressmen who requested the report. “The system should not overpay for certain patients, which creates incentives for nursing homes to spiff up their buildings and set staffing levels to entice profitable patients. I encourage CMS to continue taking steps to address these issues,” Rep. Pete Stark (DCalif.) says in a news release. Stark requested the GAO report with Sens. Max Baucus (DMont.) and Chuck Grassley (R-iowa).
But the report’s findings along with future ownership reporting requirements that are part of the ACA may be marred by poor-quality data. The existing reporting requirements are viewed to be inadequate, and some argue that adding to the requirements will make things worse in terms of getting usable information. The OSCAR data used by the GAO is too variable to be relied on, says Dr. Cheryl Phillips, senior vice president for advocacy at Leadingage, Washington, which represents not-for-profit nursing home operators.
The GAO did not release specific numbers regarding its findings because the numbers would either be slightly inaccurate or misleading depending on which of two sets of data it released, non-adjusted or adjusted, says John Dicken, director of healthcare at the GAO. The GAO’S adjusted results took into account such things as payer mix, whether a nursing home was part of a chain, competition, occupancy and size, according to the report. The researchers are confident in the general conclusions the GAO did release based on the data, Dicken says.
The GAO in 2010 recommended that HHS and the CMS require reporting of information that would make ownership structure more understandable as new ownership reporting requirements of the ACA are implemented.
Others agree that changes in how data is collected and used are needed for the ACA’S transparency requirements to be effective. The law’s requirements could make matters more complicated for providers, but not yield much useful data, says Cory Macdonald, an attorney who heads the long-term-care and senior housing group at the law firm Davis & Wilkerson, Austin, Texas. That’s because the Medicare contractors that compile the ownership data already have a tough time using the current data accurately, and giving the contractors more information to work with could make the data less useful, Macdonald says. Medicare contractors aren’t equipped to deal with the data, he says.
It’s a problem with all nursing homes—and business structures in general—that ownership structures can get complicated and difficult to define and summarize accurately, he says. Texas already has ownership reporting requirements that ask for more information than required by the federal government, and Medicare contractors struggle to interpret it, he says.