California joins the IGT movement with a bang.

Nursing homes in most states cope with inadequate Medicaid reimbursement and the threat of worse, but California lawmakers have joined the intergovernmental transfer (IGT) parade--with something extra: an ambitious plan to link the increased funding to improved quality of care. A new state law creates a 6% tax on nursing home revenue (3% the first year), with the state pooling the money--a "quality-assurance fee"--to trigger matching federal funds. This will effectively double total Medicaid dollars that are distributed by the state to the nursing homes, reported the News-Press, a daily newspaper covering California Assembly Majority Leader and bill sponsor Dario Frommer's home base of Glendale. The homes are subject to funding caps in various categories, however, such as for administration and patient care.

"This is the first major reform in nursing home financing in California in about 25 years," Frommer told the News-Press. "What it's going to mean for our patients is better care, better funding for the homes themselves, and better training and better wages for the workers."

"This rate increase is to improve the care of residents in nursing facilities," said Gov. Arnold Schwarzenegger in support of the bill. "I am directing the Department of Health Services to closely monitor implementation and to identify opportunities to recognize and 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."

The funding caps have sparked controversy, however, because the law does not include penalties for facilities that violate them. "If you don't use this money the way you should, or if you don't meet the current staff-to-patient ratio, they're not going to take those funds away," Patricia McGinnis, executive director of California Advocates for Nursing Home Reform, told the News-Press. "This doesn't have any of those checks-and-balances. For some facilities which provide pretty good care anyway, this is great. But for ones that game the system, and have been gaming the system for years, this is a bonanza. They struck the jackpot."

The law will sunset on July 31, 2008. The state will evaluate nursing homes on a variety of quality measures before the new funds kick in, and again in 2008 to see if and how the additional dollars made a difference. The evaluations will document:

* the number of skilled nursing homes that are complying with the state minimum staffing requirements;

* the staffing levels maintained;

* staffing retention rates;

* the number of nursing homes with findings of immediate jeopardy, substandard quality of care, or actual harm to residents;

* the number of state citations received by nursing homes;

* the average wages and benefits paid to nursing home employees; and

* in the follow-up report, the extent to which nursing home residents who expressed a preference to return to the community were able to do so.

BY DOUGLAS J. EDWARDS, ASSISTANT EDITOR