The State Assembly Health Committee is considering a bill today that seeks to unearth potential corruption in skilled-nursing facilities’ financial statements.
Sen. Henry Stern, D-Los Angeles, introduced the bill, SB 650, in February and accrued co-sponsorships from AARP California, California Advocates for Nursing Home Reform and SEIU California.
During a virtual news conference Monday, Sen. Stern said he thinks the bill is likely to receive support from the chair of the Assembly Health Committee.
Over the past year, information has spread regarding the owners of for-profit nursing facilities.
A Washington Post article last August showed how some nursing-home corporations are writing off expenses paid to companies the owner has a stake in.
The corporations, hiding their real profit, then pull more funds from the state and federal government.
“The corporate side of this industry, the larger for-profit institutions are transacting in the billions, not the millions, in billions with related parties,” Sen Stern said. “We have very little idea about whether those transactions are actually being taken in a way that is fair, that prices are not being inflated, that money isn’t being wasted or that profits are not being unjustly pocketed.”
To identify related or “shell” companies, the bill requests annual consolidated financial statements audited by a certified public accountant. Owners must also disclose any companies they have at least a 5% share of that transacts with the nursing facility.
“The industry capitalizes on an asymmetry of information. The nursing homes know their costs; they know their profits, and the state simply doesn’t,” said Tony Chicotel, CANHR staff attorney. “This lack of transparency results in the state getting ripped off.”
He noted that current state regulations focus on licensees, but SB-650 targets owners.
Blanca Castro, AARP California director of advocacy, believes it is a nonpartisan issue.
The bill passed the Senate floor in June with 34 ayes, three nays and three votes not recorded.
Sen. Andreas Borgeas, R-Fresno; Brian Dahle, R-Bieber, and Brian Jones, R-Santee, issued the three “no” votes.
SEIU Local 2015, a union of California’s long-term care workers, joins the bill with a caretaker’s perspective.
“SEIU 2015 workers are very ,very proud to be co-sponsoring SB-650 because we feel strongly that shining a light on the lack of transparency from some of California’s largest nursing home employers is a fundamental step toward our vision for a long-term care system that puts care first, not profit,” Arnulfo De La Cruz, SEIU 2015’s executive vice president, said.
All speakers mentioned that funds do not seem to be going to workers at the facilities.
“We could be seeing billions of dollars of waste and abuse in this industry where those dollars are so desperately needed on the frontlines,” Sen. Stern said.
He believes the lack of workers has led to nursing home deaths during the pandemic.
“This is not a next-year issue, this is right now. If the pandemic has taught us anything, it has really revealed those cracks in the system,” he said.
State lawmakers increased the medical budget this year. The budget includes a large expansion of Medi-Cal, which pays for nursing home care.
“If we want to wait four years on checking where that money went, that doesn’t make much sense from a taxpayer protection perspective — let alone a human dignity or a caregiver perspective,” Sen. Stern said.
Although the Office of Statewide Health Planning and Development is busy, Sen. Stern insists on the timing of the bill.
“We’re all going to be aging more and more. The aging population in California is going to be skyrocketing in decades to come, and the spending that we’re going to have to put into caregiving is going to be unprecedented,” he said.
The bill does not apply to assisted living facilities nor in-home care.