Georgia’s politically connected nursing home industry stands to gain an extra $26 million a year in taxpayer funding from an obscure rate change approved by lawmakers, although many of those same lawmakers now say they don’t remember how it got into the state budget.
The state Department of Community Health board is scheduled to vote Thursday on the General Assembly-backed rate change, which would pay more to companies that bought nursing homes in Georgia between Jan. 1, 2012 and June 30.
The state Senate added language supporting the rate change to its version of this year’s budget. If approved by the DCH board, the General Assembly will likely consider approving the $26 million — $8.7 million in state funds and the rest in federal tax dollars — during the legislative session starting in January.
About 40 nursing homes could see rate increases under the change, including several owned by top political donors to Gov. Nathan Deal, Lt. Gov. Casey Cagle and leading lawmakers, according to a DCH report.
The industry said the higher rates will offset the cost of new ownership, such as improvements that need to be made to facilities after they have been purchased.
“The costs incurred when a facility changes ownership can be significant,” Jon Howell, president of the Georgia Health Care Association, said in a statement to DCH. “It is important to note that many of the facilities that incur a change in ownership are low performers that need upgraded physical plants and an improved wage scale to attract top caregiver talent to improve patient care.”
However, there is nothing in the proposal that lawmakers approved and the DCH is considering that would mandate the money go toward such improvements, agency officials said.
“This doesn’t really make sense to me,” said DCH board member Jamie Pennington of Sandy Springs when the rate hike plan was initially brought before the panel in August.
When The Atlanta Journal-Constitution asked about the rate proposal, DCH Commissioner Clyde Reese would only say it was a legislative initiative.
The rate change language wasn’t included when Deal proposed a $20.8 billion state budget in January. The House didn’t include it either when it passed its version of the budget. It was added by the Senate and tinkered with by budget writers before being passed by both chambers. The language was part of the budget Deal signed into law this spring.
Sen. Tim Golden, R-Valdosta, chairman of the budget subcommittee handling health care funding, said he doesn’t remember it.
Sen. Valencia Seay, D-Riverdale, a member of Golden’s subcommittee, doesn’t remember it being discussed. “I would have had to have a lot more information, I would have asked a lot of questions,” Seay said. “Follow the money trail.”
Senate Appropriations Chairman Jack Hill, R-Reidsville, said he didn’t remember how it wound up in the budget, but added, “It was not intended to change anybody’s compensation.”
Other senators said they also don’t remember how it made its way into the budget.
Typically, money or language expressing the desire to spend money gets added to the budget dozens of times each year, often at the behest of a lawmakers’ constituent or a special interest lobby, or simply because it funds a legislator’s pet project.
A powerful lobby
In this instance, there is a lot at stake for the industry, the politicians involved — and at least one politically-connected family.
Nursing homes care for about 52,000 Georgians and received about $1.2 billion last year in funding from the state-federal programs run by DCH. That’s about 70 percent more than in 1995. The industry’s lobby — the Georgia Health Care Association — has for decades been a prominent player in the final days of General Assembly sessions, working on reimbursements for operators or favorable legislation.
Owners have also been among the biggest political donors to state leaders and parties. When Democrats like Gov. Roy Barnes were in power, they attracted most of the nursing-home money. When Republicans took over the state, much of the big money switched to them.
The industry has contributed about $900,000 to Deal’s campaigns and political action committee. Real PAC, the political action committee created to support Deal, received about 40 percent of its contributions from the nursing home industry.
The Pruitt family, among Deal’s top donors, has at least eight nursing homes on the DCH’s list of possible beneficiaries of the rate changes. All eight were listed as changing ownership this year, including five during the 2014 session. The proposed change could increase annual payments to homes owned by the family by about $4 million.
Neil Pruitt Jr., chairman and chief executive officer of PruittHealth, was appointed to the University System Board of Regents by Deal and is past chairman of the board of the American Health Care Association and the Georgia Health Care Association.
Other nursing home companies that could benefit from the change have traditionally been big donors to state officials and lawmakers as well. Cagle has received more than $100,000 in contributions from the industry since 2006, when he was elected lieutenant governor and Senate president. The group’s lobbying arm and top companies have given more than $1 million to legislative candidates, political parties and partisan political action committees in recent years. The nursing home lobby hired Deal’s son-in-law just after the governor was elected in 2010.
“They have an effective lobby and they are listened to down at the Capitol,” said Alan Essig, a former state budget analyst who runs the Georgia Budget and Policy Institute think tank. “It’s not a Democratic or Republican issue. They will use their influence no matter who is in power.”
Operators say they need extra money
The DCH board tentatively approved the rate change in August and backed a proposal to request the $26.2 million in state and federal funds to pay for it in the mid-year budget lawmakers will consider this winter. However, Reese told board members that approving the budget plan didn’t preclude them from voting against the rate change Thursday.
Teresa MacCartney, the governor’s budget director, said while Deal supported the language calling for the rate hike, the governor hasn’t decided whether to recommend funding it next year.
Howell, from the nursing home association, told DCH that the new operators need the extra money.
“New operators incur start-up expenses for new systems, manuals, procedures, and training,” Howell wrote. “Moreover, new operators are often facing the scenario where the prior operator anticipated the end of their tenure, so has been reluctant to incur costs from which it will not benefit.
“Additionally, if a change in ownership occurs while a facility is struggling with a regulatory problem … the costs to correct that problem can be extreme,” he added. “As it stands, the new operator is forced to keep the prior operator’s low rate (of reimbursement) for at least 18 months before receiving a rate based on the new operator’s cost.”
When asked why the rate change would apply only to nursing homes bought after Jan. 1, 2012, Dan Curran, a private public relations strategist working for the association, said officials thought it would be “too cost prohibitive” to help nursing home owners who bought before that date.
Tim Connell, DCH’s chief financial officer, said his agency tried to write guidelines for the rate change so that nursing home owners wouldn’t get higher payments by merely changing managers, changing names or “selling” their facility within the family. Connell said, for instance, a nursing home that changed its name wouldn’t be eligible.
Essig said the rate increase may or may not make sense. But the way it made its way into the state budget, he said, is all too common.
“In a perfect world, this should be vetted by a committee and there shouldn’t be any surprises,” he said. “If it doesn’t go through the process, rank-and-file members can’t be expected to know everything in the budget. I don’t think it’s uncommon, but it’s not the most rational way to make budget policy.”
Watching your tax money
State Capitol and watchdog reporter James Salzer started digging into a proposed reimbursement increase for nursing homes last month when he attended a Department of Community Health meeting and noticed that board members didn’t understand why the rate increase was being considered. Salzer obtained records about the proposal through the Open Records Act and interviewed key legislative sources. Members of the Georgia Health Care Association, representing the nursing home industry, and proprietors of large nursing homes declined to be interviewed, and instead referred Salzer’s questions for this story to a public relations consultant.