After the Pandemic Hit Nursing Homes Hard, California Lawmakers Push to Tighten Licensing Rules

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Source: Kaiser Health News, by Samantha Young

When Johanna Trenerry found a nursing home for her husband after his stroke, she expected his stay would be temporary.

He never came home.

Arthur Trenerry died at Windsor Redding Care Center in Northern California in October 2020. The 82-year-old great-grandfather is among more than 9,900 California nursing home residents who have died of covid-19.

The nursing home where Trenerry died is licensed by the state, but not under its current owner, Shlomo Rechnitz. The state denied Rechnitz a license, citing at least one death and multiple cases of “serious harm” at other nursing homes he owns or operates. To get around that, Rechnitz formed a business partnership with one of the home’s former owners, who continues to hold the facility’s license.

Some California lawmakers want to put an end to those types of business arrangements and ban people or entities from buying or operating nursing homes unless they have a license — which is the situation in most states. They’re also proposing an overhaul of the licensing process to reject applicants with poor performance and those without adequate experience or financial resources.

The ambitious effort, which the industry considers an overreach, could make California’s oversight the gold standard and a model for other states trying to improve nursing home care. Nationwide, more than 152,000 residents of nursing homes have died of covid during the pandemic, according to federal data.

“The public health emergency that we’ve experienced could be something that becomes a catalyst for making real change,” said Dr. Debra Saliba, a UCLA professor of medicine who served on a National Academies of Sciences, Engineering, and Medicine committee that released a comprehensive report on nursing homes in April. “One of the things that we have right now is the determination, the resources to make things happen.”

In his State of the Union address in March, President Joe Biden said the quality of care had declined in nursing homes taken over by investors — and vowed to set higher federal standards. In anticipation of the speech, the White House released a proposal calling on Congress to boost funding for nursing home inspections and to give federal regulators the authority to deny Medicare funds to underperforming facilities. The administration also directed the Centers for Medicare & Medicaid Services to propose minimum staffing standards within a year.

States are also taking steps to improve quality. New Jersey, for example, this year adopted a law that toughens penalties for health violations and requires nursing homes to disclose financial records.

In California, lawmakers are considering several proposals, including the changes to nursing home licensing rules.

Companies and individuals can buy or run nursing homes in California before they get a license, a process that even an industry lobbyist described at a legislative hearing this year as “backward” and unique to the state.

“In California, nursing home owners and operators can operate without a license even after they’ve been denied a license,” said state Assembly member Al Muratsuchi (D-Torrance), author of AB 1502. “Many of these owners and operators have, unfortunately, an extensive history of neglect and abuse.”

Muratsuchi’s bill would require an owner or company to apply for a license 120 days before buying or operating a nursing home and include financial records that contain the names of all owners and investors. The state would reject applicants who fail to meet standards for character, performance in other homes, and the financial ability to run the home. Homes operating without a license would lose Medicaid funding and couldn’t admit new residents.

The powerful California Association of Health Facilities, which represents more than 800 nursing homes, has blocked previous licensing legislation and has set its sights on Muratsuchi’s bill. The group is led by Craig Cornett, a veteran of the state Capitol who has worked for four Assembly speakers and two Senate leaders.

The organization has made just over $2 million in political contributions and spent $5.9 million lobbying lawmakers from Jan. 1, 2011, through March 31, 2022, according to records filed with the California secretary of state’s office.

The bill fails to consider the state’s “complex regulatory environments” and would create “extensive” disclosure requirements on ownership applications that “in many cases would fill an entire room with boxes and boxes of paper,” Jennifer Snyder, a lobbyist for the association, told lawmakers in January.

The measure would “eliminate the ability for most current owners in California to actually apply or even apply for a change of ownership,” she added.

But this year, the industry faces an altered political landscape.

Covid has pushed lawmakers to act — and Muratsuchi has gained a valuable co-sponsor for his bill, Democratic state Assembly member Jim Wood, head of the Assembly Health Committee. Wood has condemned nursing homes for not doing enough during the pandemic and has directed state regulators to conduct stricter oversight.

Muratsuchi’s measure has cleared the state Assembly and awaits a hearing in the Senate.

Investigations by news organizations CalMatters and LAist last year found that at least two California nursing home operators without licenses were running dozens of facilities even though officials at the state Department of Public Health had declared them unfit to do so.

The homes remain open, in large part because finding another nursing home for residents is incredibly difficult.

In July 2016, state regulators denied a license to Rechnitz — who had purchased the Windsor Redding Care Center, where Arthur Trenerry died — citing 265 health and safety code violations at his other facilities in the previous three years. Nevertheless, Rechnitz continues to operate the home in partnership with a former owner, Lee Samson, who is listed as a license holder in state records.

Mark Johnson, a lawyer who represents Rechnitz and his company, Brius Healthcare, said that Windsor Redding Care Center’s “license is in good standing” and that Rechnitz is managing the facility under an agreement “that is customary in the skilled nursing facility industry.” Rechnitz has filed a new and updated license application with the state, Johnson said.

Johanna Trenerry said she had no idea Rechnitz had been denied a license. Had she known, she said, she would never have placed her husband of 60 years at Windsor Redding.

Even before her husband caught covid, Trenerry and her children were trying to transfer him to another home because he seemed overly medicated, could no longer hold up his head, and fell numerous times trying to get out of bed, she said. Once, she recalled, the nursing home brought out the wrong person when the family visited.

They kept him “so drugged up,” said Nancy Hearden, one of the Trenerrys’ eight children. “And I think it was just because it was easier for them. He wasn’t getting to go to his rehab. I felt, ‘We’ve got to get him out of this place.’”

Then he got covid.

Sixty of the 84 residents at the facility came down with the disease in September 2020 — and at least two dozen of them died. According to a lawsuit filed by family members of 15 residents who died, including the Trenerrys, employees of the home were forced to work despite having covid symptoms. The lawsuit refers to state citations that found the home didn’t supply enough personal protective equipment to staffers, didn’t test staff, and placed covid patients and untested patients in the same rooms with residents who weren’t infected.

Johnson denied the allegations.

California’s Three Largest Health Insurers Among Few to Show Obamacare Profit in 2014

The Los Angeles Times reports that Blue Shield of California led the country with $107 million in profit on Obamacare policies sold to individuals. Kaiser Permanente was second with $66 million, and Anthem Blue Cross ranked seventh nationally with a $9-million surplus in the Covered California exchange.  In the first year of the massive coverage expansion, California’s three largest health insurers bucked the national trend of heavy losses and accounted for half of the gains reported under the Affordable Care Act in 2014.

Blue Shield of California led the country with $107 million in profit on Obamacare policies sold to individuals. Kaiser Permanente was second with $66 million, and Anthem Blue Cross ranked seventh nationally with a $9-million surplus in the Covered California exchange.

Nationwide, insurers reported just $362 million in total profit under a federal rate-stabilization program, while most insurers recorded big losses — a total of $2.87 billion.

Critics have seized on the industry losses as a sign that the health law is failing. Those concerns were amplified when the nation’s largest insurer, UnitedHealth, warned that it may quit selling Obamacare policies because the business was so unprofitable. Now some experts point to California’s experience as a sign that this can be an attractive business for insurers — so much so that it has raised questions about whether state officials should have pushed harder for lower rates.

The data show insurers did not do well nationally, said Larry Levitt, a senior vice president at the nonprofit Kaiser Family Foundation. But in parts of the country where things were working smoothly, like California, insurers were making money.

This new federal data offer the most extensive look yet at how insurance companies fared under the new rules of the Affordable Care Act. The figures are part of a risk corridors program designed as a temporary cushion against high medical claims during the first three years of the national healthcare overhaul.

Under the program, insurers that made money were required to send those funds to the federal government to offset the losses of other companies participating in Obamacare. The arrangement means that California insurers won’t keep these 2014 profits.

Neither will the companies that lost money be made whole right away. The losses were so widespread, and the gains so paltry, that the federal government could only cover 13 cents for every dollar the companies lost. Officials have vowed to use money from this year and 2016 to pay what’s already owed.

Several factors helped California health plans outperform the nation, including strong early enrollment and a politically unpopular decision on policy cancellations. Amid a national uproar, Covered California defied the Obama administration and required participating insurers to cancel existing individual policies at the end of 2013.

That move created a healthier, more diverse mix of old and new policyholders at the start of the exchange. About 35 other states allowed consumers to stay longer on health plans that didn’t comply fully with the new law. That decision left many states with a smaller and sicker population signing up for Obamacare. Many new enrollees had been denied coverage previously because of pre-existing conditions.

“Federal data show that California had the healthiest risk pool of all 50 states,” said Mike Beuoy, a vice president and actuary at Blue Shield. But he and other industry officials say it was hard to predict what would happen heading into the first year of Obamacare coverage.

“We were setting rates for 2014 in the absence of any hard information on what the risk pool would look like,” Beuoy said.

Insurers noted that these excess profits represent a small percentage of the $4.6 billion in premiums paid in the Covered California exchange during 2014. Taxpayers paid about 70% of those premiums through federal subsidies that consumers received based on their income, state data show. “In hindsight, the rates we charged in the individual market were higher than they needed to be,” said Mick Diede, chief actuary at Kaiser Permanente, the state’s largest insurer. For 2015, Kaiser cut its rates 1.4%, on average.

“I think the California experience was a bit of an anomaly,” Diede said. We expect it to even out. Other California insurers may have been helped by the fact that many consumers had difficulty finding a doctor or getting care during 2014. That could have reduced medical claims, boosting the bottom line for companies.

Blue Shield and Anthem Inc., in particular, struggled to deal with the surge of applicants early on and then compounded those enrollment glitches with inaccurate provider directories, regulators found. Officials at Covered California and the insurers say they are examining to what extent those barriers reduced claims.

Michael Johnson, a former Blue Shield official and now a company critic, said the San Francisco insurer should issue more refunds to customers. Blue Shield made this huge profit because they hindered access to care, he said. The company already paid rebates worth $62 million to its individual policyholders for 2014 because it didn’t spend a minimum of 80% of premiums on medical care. A spokesman for Blue Shield said its customer service and provider information have both improved since last year.

A recent report underscores how well California health insurers have held the line on spending premium dollars on medical care despite enormous changes in the market. California was one of only three states nationwide in 2014 where insurers paid out less than 80 cents of every dollar in premiums on medical care, according to Urban Institute researchers. The state went from 81.5% in 2010 to 79.8% last year for the individual market.

Last year’s surplus in California might prompt regulators to take a closer look at the rates that individuals and families are paying for Obamacare. Did Covered California push as hard as it could on rates? It’s a legitimate question to ask, said Katherine Hempstead, who studies health insurance issues at the Robert Wood Johnson Foundation. Unlike most other states, California negotiates premiums with health plans and doesn’t allow every insurer into its exchange.

Peter Lee, Covered California’s executive director, said the state has been effective at achieving stable rates that spare most consumers from double-digit increases annually. The average rate increase in Covered California was 4% for both 2015 and 2016.

A few plans in California made a little bit more than they thought they would in 2014, Lee said. This is evidence the California exchange market can work for patients as well as health plans.

Last Updated 08/10/2022

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