Maryland Studying Legislation to Hold Nursing Homes Accountable

By James Drew
Baltimore Sun reporter

June 16, 2008

Alarmed that the purchase of nursing homes by larger companies could cause a decline in care, Maryland is studying whether restrictions should be placed on ownership as regulators face criticism that private equity groups make it more difficult for the public to hold nursing homes accountable for poor care.

The goal of the two bills that Gov. Martin O'Malley recently signed into law is to determine if the type of ownership - ranging from small nonprofits to corporations with worldwide holdings - has a connection with violations of state and federal regulations at nursing homes, said Wendy Kronmiller, director of the state Office of Health Care Quality.

The driving force behind the effort is the acquisition of one of the nation's largest nursing home chains, HCR ManorCare, by the Carlyle Group for $6 billion in December. HCR ManorCare has 14 nursing homes in Maryland and 277 nationwide.

The Service Employees International Union, which represents 1,100 workers at HCR ManorCare nursing homes nationwide, including 200 in Maryland, released a study last year asserting that buyouts of two other nursing home chains have led to more violations of state and federal regulations, and new business structures to limit liability, reduce tax bills and make it more difficult to track how Medicare and Medicaid dollars are spent. Union officials have complained of violations of federal and state regulations at HCR ManorCare nursing homes in Maryland and of what they say is ""inadequate staffing.""

Kronmiller said a task force formed this summer would have a wider scope than ownership by private equity firms. The group, which will include representatives of consumer groups and nursing homes, will analyze data over two years to determine whether there is a link between type of ownership and poor care.

The state has anecdotal evidence that talented administrators and nursing directors, combined with little staff turnover, result in better care, but officials have not studied ownership, said Kronmiller, whose office is part of the Department of Health and Mental Hygiene.

Maryland has 233 nursing homes - about 60 percent for-profit and 40 percent nonprofit, state officials say. The study will try to determine how many are owned by private equity groups.

Of the two Maryland nursing homes that federal officials placed on a national watch list this year, both are owned by private equity groups: ManorCare- Rossville by the Carlyle Group and the Waldorf Center by Formation Capital, which last year acquired Genesis HealthCare. Genesis operates 22 nursing homes in Maryland. Manor Care-Rossville and the Waldorf Center will be inspected twice a year instead of once and face possible penalties.

Kronmiller stressed that problems at the two nursing homes were detected over three years and began before the acquisitions.

But SEIU officials warn that private equity groups hold companies in their portfolios ""accountable to profits, but not quality of health care or how they treat their workers.""

""Private equity is corporate greed on steroids; how that melds with patient care is hard for us to figure out,"" said Stephen Lerner, director of SEIU's private equity campaign.

HCR ManorCare, in a written statement, said Carlyle expects to make a profit by selling its investment.

""That's how Carlyle will make money ... not by cutting costs or staffing or anything else, but by helping make HCR ManorCare a stronger care provider,"" the statement said.

Advocates for nursing home residents in Maryland said they have not documented a link between ownership type and poor care, noting that the number of violations of federal and state regulations discovered during inspections varies within large corporate chains and that some nursing homes owned by nonprofits have fared poorly in recent state inspections.

""Each nursing home is a separate entity, and there are quite wide variations in care,"" said Bob Bronaugh, vice chairman of Voices for Quality Care, a nonprofit group based in Leonardtown.

Charlene Harrington, a professor in the School of Nursing at the University of California-San Francisco, said studies she has helped conduct since 2000 have found that for-profit nursing homes across the nation operate with lower costs and smaller staffs than nonprofits, which provide more staff and higher quality care.

""I am not sure they need to do another study,"" said Harrington, referring to Maryland officials.

Private equity firms began to buy nursing homes in 2000, according to David G. Stevenson, an assistant professor at Harvard Medical School in Boston.

Stevenson said a study he recently completed did not find that nursing home quality ""worsens markedly"" after purchase by private equity firms, but he said more research was needed.

In addition to studying ownership, Maryland officials are crafting regulations - based on a bill sponsored by Del. Patrick L. McDonough, a Republican who represents Baltimore and Harford counties - to require nursing home applicants to disclose to the state ""any significant change in the financial condition,"" including cash flow. Kronmiller said the initiative stemmed from recent financial problems at nursing homes owned by smaller nonprofits, which she said could have been resolved earlier if the state had known about them.

The state also is debating possible ways to get nursing home owners to provide more details on how they are structured. That primarily would benefit consumers, she said.

For example, members of Voices for Quality Care recently researched a St. Mary's County nursing home after learning it had dozens of violations of federal and state regulations on its most recent inspection posted on the Web site of the Centers for Medicare & Medicaid Services. The group identified the firm managing the nursing home, researched other nursing homes across the nation run by the same company and is examining how ownership is structured.

Voices for Quality Care wants to do the same research for all nursing homes in Maryland and has been urging Congress to pass legislation to require more transparency in nursing home ownership.

""We're interested in who owns them, because the owners often hire out-of-state management companies, and if the out-of-state management companies are failing or having problems, we want to go to the owner,"" said Bronaugh, the group's vice chairman.

Nursing homes whose ownership includes layers of limited-liability companies also threaten to make it harder for nursing home residents to sue over poor care, said Jason Frank, chairman of the elder law section of the Maryland State Bar Association.

The Office of Health Care Quality is ""grossly understaffed, grossly underfunded, and so the regulatory model as an alternative to tort just does not work,"" Frank said.

Kronmiller, the office's director, said she would be a member of the committee that studies nursing home ownership, and the legislature would provide staff. She is chairing the group working on regulations to require nursing home to provide earlier warnings about financial problems and more information about ownership.

""It will require more work on our end, but this is what we are supposed to be doing,"" she said.

Kronmiller said she hoped the nursing home ownership study would help guide the legislature as it grapples with the controversy over private equity groups.

""Certainly the goal is to provide good care, but aren't they all trying to get money out of it? Why would this be different?"" she asked.