Nursing home profit bill awaits Governor's signature.

The all-too-common and unpopular scenario of California nursing homes losing money with every Medi-Cal patient they care for could become history if the state's governor signs recently approved reimbursement revision legislation.

Should Gov. Arnold Schwarzenegger sign the legislation, California would become the first state in the nation to guarantee nursing homes a 5 percent annual profit, according to the legislation's author, Assemblyman Dario Frommer, D-Los Angeles.

State lawmakers overwhelmingly approved AB 1629, the Nursing Home Quality Care Act, at the end of August. Schwarzenegger has 30 days to veto the bill or sign it into law, said Frommer's legislative aide Karen Kim.

As of press time, the governor had not publicly indicated whether he would sign. He was unavailable for comment before deadline.

The legislation--which received only two "no" votes from the entire state legislature during final approval - would change how nursing homes are paid when caring for Medi-Cal patients, according to Frommer.

Facilities currently receive a flat rate instead of the cost-based method used by most of the nation.

As a result, most Medi-Cal-accepting nursing homes lose money. California nursing homes are paid an average of $118 per day but spend nearly $125 per day to care for such patients, according to a 2003 report by Chicago-based accounting firm BDO Seidman.

"Nursing home care in California has been in crisis for some time," Frommer said. "Some of our most vulnerable citizens are suffering because so many of our nursing homes are losing money due to rising costs and inadequate Medi-Cal reimbursement rates. ... And each year, California is leaving hundreds of millions of dollars on the table-federal dollars that we could be using to provide better care for these patients."

Frommer's bill switches the payment method to cost-based and adds a tax--a "quality assurance fee"--paid by nursing homes to the state to increase the amount of money California contributes toward payment of Medi-Cal expenses. Since this amount is matched dollar-for-dollar by the federal government, the overall reimbursement funding going to nursing homes will increase, according to Frommer.

This concept isn't new--23 other states already employ such a method to get extra Medicaid funding, Frommer noted. The new tax is expected to generate $250 million from state nursing homes for reimbursement needs, and an additional $250 million from the federal government.

What is new in AB 1629 is guaranteed funding that would enable nursing homes to post at least a 5 percent profit each year--nearly four times the 1.4 percent profit posted by facilities in last quarter of 2002, the most recent data available from the Center for Medicare & Medicaid Services.

Associations that cater to nursing home residents cheered as the bill passed the Senate and Assembly. "Finally, we're moving forward in California to get more money for nursing home care and place some real accountability in the system to make sure our seniors are well-cared for," said Hank Lacayo, state president of the Congress of California Seniors in Sacramento, Calif. "It's a huge leap forward in quality long term care for all."

But associations that represent the state's long term care facilities were cautious. "You will be hard-pressed to find a nursing home provider who will oppose this bill," said Pat McGinnis, executive director of California Advocates for Nursing Home Reform in San Francisco. "(Every provider) has been told by the industry that this is a good bill for them. Since this is clearly a blank check for nursing homes, it will be hard to find many who don't support it, even if they don't know (all) the details."

Those details include the bill's failure to include anything about higher wages, additional staff or better training for workers, McGinnis noted. The bill also does not include any reassurances that the additional money will result in better quality of care.

The bill also exempts thousands of skilled nursing beds from the quality assurance fee, yet still makes them eligible for the additional Medi-Cal funding--resulting in a multi-million dollar shortfall that the legislation fails to consider, McGinnis said.

"While it is true that the reimbursement system should be reformed, it must be done in a manner that is geared toward the patient and not simply toward an unchecked reimbursement scheme and a guaranteed profit for nursing homes, even those that are not providing an adequate quality of care," wrote AARP state President Helen Russ in a letter to Frommer opposing the bill.

Facility operators should keep a clear perspective on the bill's capabilities, said Todd Scranton, administrator at McClure Convalescent Hospital and Rehabilitation Center in Oakland, Calif. "I think the reality of it is that it's not going to solve all of our problems," he said. "No one thinks it will. But it is a step in the right direction."

Alan Naditz Senior Editor