N.Y. governor Pataki pledges to plug medicaid reimbursement loophole.

New York Gov. George Pataki announced his support for reform of the state's Medicaid system days after a local news story focused attention on problems in Medicaid reimbursement calculation.

The news story reported a major problem involving an obscure regulation that allegedly allowed for-profit nursing homes to gain major increases in their Medicaid payments simply when seniors transfer homes to their children.

An investigation by the New York Sun uncovered the reimbursement loophole, which would even have benefited one of the people who created it--former State Hospital Review and Planning Council Chairman James Durante, who later pleaded guilty to charges of providing substandard care and falsifying business records at one of his eight New York state nursing homes.

As part of his settlement with the New York Attorney General's office in June 2003, Durante was allowed to sell part of the business to his children. When a nursing home is sold, the Health Department may approve "rebasing"--recalculating--the Medicaid reimbursement for that nursing home.

Rebasing when a nursing home is sold to the owner's children was prohibited until two years ago. That prohibition was lifted while Durante was chairman of the council that approved it. Five of the eight nursing homes sold by Durante and his partner, Joseph Nichols, will receive Medicaid rate increases through rebasing. The Sun article questioned Durante's role in changing the regulation and raised concerns that he and his partner would profit from the transaction.

The Sun article maintained that Durante's family business would receive nearly $980,000 in payment increases during the first year alone, almost enough to offset a $1 million fine that Durante must pay to the state's Medicaid program as part of his settlement.

That caught the eye of Gov. Pataki, who in his State of the State address in early January pledged to "propose comprehensive reforms of our long term care system" and "address Medicare costs borne by local governments."

Ironically, the association quoted in the Sun article as being "appalled at this whole thing" now says the matter has been blown out of proportion "[Durante] won't profit," said Richard Molott, associate director of the Long Term Care Community Coalition consumer group in New York City. "The settlement [with the attorney general] does not allow Durante to take advantage o that rebasing."

Robert Kenny, a spokesman for the New York Department of Health, said he was surprised at how the situation was portrayed in the media. But he does concede that the Durante-Nichols case is an indicator of problems with the Medicaid reimbursement system in New York. "We are glad to hear the governor say that he is committed to improving long term care in New York," Kenny said. "The system is long overdue for an overhaul in every area."

The New York Association of Homes & Services for the Aging agrees "Medicaid reform is inseparable from long term care reform because Medicaid is the major funding source for long term care in New York state," said NYAHSA President Carl Young. "This is a great opportunity to make significant changes to the current system to make it more efficient and responsive to elderly and disabled New Yorkers."