Bankruptcy Wave Prods Nursing Home Industry to Change

Just two days before Christmas, 95-year-old Lily Coffman began packing up her belongings to move to a new nursing home because her old one was closing abruptly.

It had gone broke.

“It was awful, just awful,” Coffman said. “We thought they were joking, you know, and they said, ‘No, you’ve got to be out by the 23rd of December.’ I had to get a new place in a hurry.”

The move by Coffman and about 60 fellow nursing home residents is one that is repeating itself around the nation. More than 1,600 of the nation’s 17,000 nursing homes have filed for bankruptcy since last fall as they struggle with federal funding cuts, a lack of local or state money, increased insurance costs and tougher quality-care standards. For some, the bankruptcy filings have resulted from bad business decisions, heavy debt loads and claims of defrauding government health care programs.

Most of the nursing homes in bankruptcy proceedings have remained open, despite plummeting stock prices for corporate properties, while they try to get their finances in order. But many other homes have closed or laid off employees.

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In Nevada and New Mexico, nearly half the homes owned by big chains and affiliated with the American Health Care Assn. filed for bankruptcy protection--the highest rates in the nation.

“The system is crashing around us,” said Michael Clark, executive director of the Nevada Health Care Assn. “With all the bankruptcies we’re facing, it’s a disaster right now.”

The future isn’t much better without some funding improvements, added Linda Sechovec, Clark’s counterpart in New Mexico.

“Long-term care is something nobody wants to deal with until they have to,” Sechovec said. “We are headed for a real catastrophe. If the baby-boom population hits the age that they need this care and we still have a reduced pool of workers, the system will fall under its own weight.”

To head off the crisis, Clark and Sechovec are joining in a national effort to restore federal Medicare funding that was slashed for a wide range of health care programs when Congress approved the Balanced Budget Act of 1997.

The AHCA, which represents nearly two-thirds of the nation’s nursing homes, says Medicare funding cuts in 1997 could total $15 billion over several years, even though Congress last year restored $2.7 billion for patients needing skilled nursing care.

“Balancing the budget is an important national priority,” said Dr. Charles Roadman II, AHCA president and CEO. “But we should not achieve that priority on the backs of frail, vulnerable seniors who need quality skilled nursing care.”

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Roughly 1.2 million elderly and disabled people live in the nation’s nursing homes.

The General Accounting Office released a report late last year saying Medicare patients are getting the care they need in nursing homes, although the federal changes are making it tougher for some to get into the facilities they prefer. And the federal Health Care Financing Administration, which oversees the Medicare and Medicaid programs, insists that residents of nursing homes that remain open need not worry about their safety.

But the consumer-oriented National Citizens’ Coalition for Nursing Home Reform believes the elderly and disabled are paying--if only in emotional stability--for corporate mismanagement.

“Much more is happening than just the [Medicare] reimbursement system changing, and it relates to a lot of the big mergers over the last few years . . . and it relates to corporate greediness and management,” founder Elma Holder said.

Sen. Charles E. Grassley (R-Iowa), chairman of the Senate Special Committee on Aging, questions whether poor management played a role in the nursing home industry’s problems, and has asked for a GAO study of the industry’s finances.

“The taxpayers spend $39 billion a year on the nation’s nursing homes. Is that enough to buy good care? It seems that it should be. It’s a lot of money. But we don’t know enough about how nursing homes spend that money to know for sure.”

Exactly how did the industry find itself in such deep financial trouble?

Industry analysts have said that some publicly traded nursing home companies are to blame for their problems because they borrowed to fund expansion, but didn’t figure on government cost cuts and other factors that reduced cash flow.

Roadman said the Medicare cuts have figured in decisions by 1,651 skilled nursing providers to file for bankruptcy protection since last fall--facilities that care for about 175,000 elderly and disabled patients.

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There have been nearly 400 bankruptcies in the West, including 38 of 81 AHCA affiliates in New Mexico and 22 of 47 Nevada homes --giving the two states the nation’s worst rates of 47%. The average for the West is 14.6%.

Sechovec said corporate ownership is more common in the West and South than in areas like the Midwest, where there are many independent or small-chain homes. So when big chains filed for bankruptcy, she said, that caused the West’s rate to spike.

The AHCA’s late-1999 survey of its affiliates showed that more bankruptcies occurred in the South--788--but at a slightly lower rate of 13.9%. There were 195 bankruptcies in the Northeast, for a 6.6% rate; and 272 in the Midwest, for a 4.8% rate.

Nevada’s high bankruptcy rate was due mainly to the early February filing by Integrated Health Services Inc., which has 400 homes around the nation. The Sparks, Md.-based company owns 15 of the 22 Nevada homes now under Chapter 11 bankruptcy protection.

“They’re not getting out of the business. They’re reorganizing,” Holder said of the various Chapter 11 filers. “It’s a very serious situation for nursing home residents. . . . It’s just astonishing that the government can’t figure this out and make the corporations pay for what they’ve done--the fraud they’ve committed in taking advantage of the system. The industry has gotten away with so much.”

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Clark said some local or state-level support might be needed if increases in federal reimbursements are slow in coming to Nevada. Sechovec said her association sought a state appropriation last year but was turned down. She’ll try again next year.

Another solution might be to move some nursing home residents who require the least amount of care into group care or assisted living arrangements, Clark said.

But a lower level of care won’t work for many--including Coffman, a widow who moved into her first nursing home six years ago after a knee injury left her unable to walk.

She now lives at Sierra Convalescent Center in Carson City, which also has an uncertain future. It is owned by Integrated Health Services, the major nursing home chain that accounts for many of the recent Chapter 11 bankruptcy filings.

“It isn’t just to my taste, but it has a roof over it,” Coffman said of her new home. “I was happy at the other place. I had one little tree I could look at, and a view of the mountains.”