State Audit Finds Substandard Quality of Care in California Nursing Homes

Once you’ve chosen the nursing home that’s right for you and successfully applied for long-term Medi-Cal, you should be able to expect that your nursing home will make your safety and well-being its number one priority and maintain compliance with state and federal regulations. Unfortunately, that’s not always how things go in the real world.

On May 1, the California State Auditor, Elaine Howle, issued Report 2017-109 concerning nursing homes in California. As its title explains, the audit found (among other issues) that “absent effective state oversight, substandard quality of care has continued” in California nursing homes.

Several media outlets have covered this report, and I think it’s important for prospective nursing-home residents (including Medi-Cal applicants) to understand what it says. Let’s take a quick look at the three main findings of this report and what they mean for nursing-home residents in California:

  • Nursing homes are providing substandard care (and the Department of Public Health isn’t doing its job)
  • Big nursing homes’ net income is up (thanks in part to questionable related-party transactions)
  • State agencies aren’t coordinating their oversight programs.

Substandard Care in California Nursing Homes

Perhaps the most troubling of the audit’s findings is that nursing homes continue to provide substandard care to their residents. Between 2006 and 2015, the number of F-L and J-L deficiencies issued by the California Department of Public Health (DPH) increased by 31% and 35% respectively, even though the total number of beds remained relatively constant.

What are F-L and J-L deficiencies? F-L deficiencies are a nursing home’s failure to comply with federal requirements that lead to “a widespread potential for more than minimal harm” or actual patient harm. J-L deficiencies, also known as immediate jeopardies because of their severity, are compliance failures that cause (or are likely to cause) serious injury, harm, impairment, or death to a nursing-home resident.

In a response to the audit, DPH claimed that the increased deficiencies just show that the agency is doing its job. But the auditor determined otherwise, concluding that the Department “has not fulfilled one of its key oversight responsibilities—to ensure that nursing facilities meet quality-of-care standards.”

Big Nursing Homes’ Net Income is Up

Despite the increase in deficiencies issued by DPH, the net income for three of the largest nursing-home companies in California increased significantly between 2006 and 2015. In 2006, none of those companies’ net income exceeded $10 million; in 2015, their net incomes ranged between $35 million and $54 million.

Part of that increase came from related-party transactions. A related-party transaction occurs when one person (or company) owns more than one business, and those businesses engage in transactions with each other.

For example, a company that runs a nursing home might pay rent to a real estate company that is owned by the same person who owns the nursing-home company. Or the nursing home might buy medical supplies or therapy services from another business owned by the nursing home’s owner.

Although these types of transactions are legal, some argue that they enable the common owner to inflate his or her income or defraud California taxpayers. Fortunately, the audit found that the California Department of Health Care Services (DHCS), which oversees long-term Medi-Cal benefits, has procedures in place to prevent such related-party transactions from increasing the amounts nursing home owners receive from the agency.

State Agencies Aren’t Coordinating Their Oversight Programs

However, although the audit lauds DHCS for protecting against fraudulent Medi-Cal claims, it still comes in for some criticism. In California, oversight of nursing homes is split up among three agencies, DPH, DHCS, and the Office of Statewide Health Planning and Development.

Because of the way state oversight is split up, there is some overlap between these three agencies. Yet, they don’t always coordinate their oversight efforts, meaning they—and nursing homes—engage in duplicative tasks. Those inefficiencies lead to increased costs for the California government and nursing homes.

What the Audit’s Findings Mean for You

There are two ways to think about the audit’s findings: as a taxpayer and as a nursing-home resident (or prospective resident or family member). I’ll leave the taxpayer’s perspective to the pundits.

What matters most is the safety of California’s nursing-home residents. As residents, prospective residents, or their family members, we should all be concerned at the increase in serious deficiencies found by DPH, as well as DPH’s failure to properly inspect California’s nursing homes. Hopefully this report will serve as a wake-up call for DPH. In the meantime, you can do your part to protect yourself by thoroughly investigating nursing homes before settling on one.

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