Industry Lawsuit Details Over $500 Million Per Year Diverted from Resident Care

January 21, 2022 – At the end of December, more than 200 nursing homes filed a federal lawsuit against New York State, seeking to stop implementation of a new state law on nursing home spending. That law, which passed with strong, state-wide support last year in the Assembly and Senate, requires nursing homes to spend at least 70% of their revenue on resident care and limits the facility operator’s profits to 5%.

Background

The new law was deemed necessary by legislative leaders and many stakeholders (including LTCCC) to address the serious and persistent failure of too many nursing home operators to provide sufficient staffing and supplies to meet residents’ basic clinical needs. As a result of lax monitoring and oversight (see our recent report, Broken Promises, and the new US OIG assessment of state oversight), too many nursing home operators have been permitted to skimp on staffing and services for years, profiting at the expense of basic dignity and safety. The tragic impact of the COVID-19 pandemic made clear that something must be done to ensure that a reasonable amount of the money that New Yorkers allocate to nursing homes for care is actually used to provide that care.

Nursing Home Industry Complaint
Center for Medicare Advocacy Report

What the Industry’s Lawsuit Reveals

The industry’s lawsuit (filed by its counsel, O’Connell and Aronowitz, P.C.) claims that it is unfair for the state to require nursing homes to spend a minimum amount of money on care or limit the profits they can pull from a nursing home. Remarkably, for 239 nursing homes, the industry’s complaint details the amount of excess income each operator would have had to pay to the state in 2019, if they had been required to limit profits to 5% and spend 70% of their income on residents. Altogether, these facilities reported excess income of over $510 million in 2019 alone.[i]

“Nursing homes are entrusted to provide decent care and dignity for our most vulnerable residents,” said Richard Mollot, LTCCC’s executive director. “The fact that so many joined in this lawsuit to avoid even modest financial accountability speaks volumes about the industry’s priorities. Is there anything that we can do to get them to stop putting profits over patients?”

Key Takeaways – Millions Diverted from Care

  • The facilities’ reported excess income could have paid the annual salary and benefits of nearly 5,600 additional full-time Registered Nurses.[ii] RNs are generally the only staff in the facility with the training to provide clinical oversight. Higher RN staffing levels are associated with positive resident outcomes including reduced pressure ulcers, infections, pain, and mortality.[iii]
  • The facilities’ reported excess income was the equivalent of over 26 million additional nurse aide hours (hourly wage, excluding benefits).[iv] Nurse aides provide 90% of the care and services residents receive. Low nurse aide staffing is associated with higher rates of pressure ulcers, falls, and degrading conditions for residents.
  • The average excess annual income claimed by the providers was $2,144,770.[v] [Note: This figure excludes profits extracted via related party transactions.[vi]] That is equivalent to almost 112,000 nurse aide hours per facility.[vii]

Key Takeaways – Poor Care + Demeaning Conditions = Big Profits

  • Low-Performing but High-Profit. 36 of the 239 (15%) nursing homes in the complaint are, according to federal records, among the worst facilities in the country.[viii] They alone are claiming $45 million in excess annual income. Seven of these nursing homes have an abuse warning icon on their listing with the U.S. government.
  • Inadequate Care Staff. 85% of the nursing homes in the complaint provide nurse staffing below 4.1 hours per resident per day (HPRD), the minimum needed to meet a resident’s basic clinical needs.[ix]
  • Skimping on Registered Nurses. 73% of the nursing homes in the complaint provide Registered Nurse staffing below .75 hours per resident per day (HPRD), the minimum needed to meet a resident’s basic clinical needs.[x]
  • For-Profit = For-MORE-Profit. 95% of the nursing homes in the complaint are owned and operated by for-profit entities. Statewide, New York’s share of for-profit entities is 65%.

[i] LTCCC’s calculations excluded Crown Heights Center in Brooklyn because the facility’s claim amount is clearly misstated in the complaint. Crown Heights is listed in our public data file without its monetary claim.

[ii] The provider complaint claims a total of $510,455,196 in excess income (due to failure to meet the 70%/40% spending ratio and/or exceeding the 5% profit cap in the new state law) for 2019. The average total compensation (including benefits) for a nursing home RN is $91,525 (www.salary.com). $510,455,196 / $91,525 = 5,577.

[iii] Harrington, C., Dellefield, M. E., Halifax, E., Fleming, M. L., & Bakerjian, D. Appropriate Nurse Staffing Levels for U.S. Nursing Homes. Health services insights, 13, 1178632920934785 (2020). https://doi.org/10.1177/1178632920934785

[iv] According to the U.S. Bureau of Labor Statistics, nursing assistants in New York State have an hourly mean wage of $19.53 (May 2020). $510,455,196 / $19.53 = 26,136,979.

[v] $510,455,196 / 238 = $2,144,770.

[vi] For more information, see Rau, Jordan, “Care Suffers as More Nursing Homes Feed Money Into Corporate Webs,” The New York Times (January 2, 2018). https://www.nytimes.com/2018/01/02/business/nursing-homes-care-corporate.html

[vii] $2,186,799 / $19.53 = 111,971.

[viii] We identify such facilities as those having a one-star overall federal rating and/or being a Special Focus Facility (SFF) or SFF candidate (based on our last report of federal ratings, downloaded September 2021).

[ix] See Abt Associates (Prepared for the Centers for Medicare and Medicaid Services), Appropriateness of Minimum Nurse Staffing Ratios in Nursing Homes, Report to Congress: Phase II Final (December 2001). https://www.justice.gov/sites/default/files/elderjustice/legacy/2015/07/12/Appropriateness_of_Minimum_Nurse_Staffing_Ratios_in_Nursing_Homes.pdf

[x] Id.