Cash-strapped nursing homes are suing Gov. M. Jodi Rell in federal court in pursuit of more Medicaid dollars, a dramatic step that seeks to significantly change the way the homes are funded.
The suit, filed Thursday morning by the Connecticut Association of Health Care Facilities, charges that Connecticut’s system of paying for nursing-home care violates federal law and under funds the homes by more than $100 million yearly. The association represents more than 100 homes with at least 14,000 patients.
Lobbyists for the nursing homes have complained at the state Capitol for a decade or more about small annual increases — and no increase in some years — as the homes struggle to care for the state’s frail elderly.
Due in part to the low Medicaid reimbursement rates, 22 Connecticut nursing homes have closed since 2002, according to state statistics. In 2009, four homes closed, while seven were in bankruptcy and 10 had been placed under state receivership, state and nursing home officials said.
Unable to gain relief from the state legislature, the nursing home association says it had no choice but to sue.
“The state of Connecticut’s system for paying Medicaid-participating nursing facilities is broken,” the 57-page suit says in its opening sentence.
Rell’s office had no immediate comment, saying that the administration had just learned of the lawsuit around 11 a.m. today. Rell herself was at a pre-scheduled event at the Powder Ridge ski area on a snowy day – saying that the state would help to preserve the ski area.
“The state’s payments to these for-profit nursing homes are neither arbitrary nor unlawful. On the contrary, the state’s payment rates are among the highest in the nation, and the method use to determine payment rates is subject to approval by the federal Centers for Medicare & Medicaid Services,” said Rich Harris, Rell’s spokesman.
“Moreover, even as the actual number of Medicaid-eligible residents in Connecticut has dropped by 8 percent over the last five years, the amount of money the state has spent on Medicaid-funded care in nursing homes has increased by 9.3 percent. The state now spends $1.2 billion a year for nursing home care for Medicaid patients,” Harris continued.
“Meanwhile, the overall trend is away from nursing home care due to the availability of alternatives such as assisted living, in-home care and other services. There are fewer nursing homes and fewer licensed beds than five years ago, and even 2,400 vacant beds last month.”
The suit asks the court to declare that Connecticut’s funding system “conflicts with federal law and is otherwise unlawful.” But rather than asking directly for specific money damages, the homes are asking the federal court to issue an injunction and force the state to fix the system.
Rell is the only person named in the suit, among the biggest filed against the state in recent years. Former Gov. William A. O’Neill was named similarly in his official capacity in the landmark Sheff vs. O’Neill school desegregation lawsuit.
The case was crafted by three attorneys from Hartford-based Murtha Cullina and two attorneys who specialize in health care litigation for a Washington, D.C., firm.
The homes argue that federal law requires that Medicaid payments must be based on the quality of care, among other factors. But in Connecticut, the suit says, the state “uses a methodology that sets payment rates based solely on state budgetary concerns, regardless of whether the amount spent — or the process used to determine the amount to be spent — assures that payments are consistent with the efficiency, economy, quality of care and equality of access,” the association said.
The suit was filed by East Hartford-based Connecticut Association of Health Care Facilities, which represents more than 100 homes with more than 14,000 patients. The case was crafted by three attorneys from Hartford-based Murtha Cullina and two attorneys who specialize in health care litigation for a Washington, D.C. firm. The CAHCF largely represents for-profit homes, while a separate association – which is not involved in the suit – represents most of Connecticut’s non-profit homes.
In a statement on the suit, the association says it “has done everything in its power to effect change legislatively, to no avail. Therefore, CAHCF has filed its lawsuit as a last resort to compel the state to comply with federal law.”
Overall, Connecticut currently has 238 nursing homes with about 28,000 beds in an industry that collects about $2.5 billion annually. But with more than 30,000 employees overall and high expenses, the industry is not as profitable as it once was. Some homes are barely breaking even and others have gone out of business. While the average nursing home has about 120 beds, some are as large as 300 beds.
The lawsuit notes that 68 percent of nursing home revenues come from Medicaid, another 14 percent from the government-paid Medicare system, and 15 percent from private insurance or individual payments. The Medicaid payment system can be highly complicated, involving reimbursement for direct, indirect, administrative, and capital costs with various regulations determining what is an “allowable” cost.
The Connecticut Association of Health Care Facilities, based in East Hartford, largely represents for-profit homes. A separate association, the Connecticut Association of Not-for-profit Providers For the Aging, represents most of Connecticut’s non-profit homes and is not involved in the suit.
“This lawsuit is a last resort. After years of underfunding, Connecticut’s nursing homes are stretched to the limit trying to provide high quality care to 28,000 frail and elderly residents without adequate funding,” said Matthew V. Barrett, the association’s executive vice president.
He added, “Connecticut is poised to continue on its unlawful path, unless the state is compelled otherwise by the United States District Court.”
CAHCF outlined its case by describing the following two claims:
(1) “Connecticut’s Medicaid rate-setting system violates very clear rules found in federal law. The federal law that Connecticut ignores is supposed to assure that payments to Connecticut nursing facilities are consistent with efficiency, economy, quality and equality of access to care. However, by using payment methodologies that assure that payments bear little or no relationship to the cost of care, Connecticut guarantees that the requirements of the federal law will not be met. In fact, there is no evidence that Connecticut sets federally-required payment rates to nursing facilities on an objective, reasonable and principled basis.”
(2) “Connecticut’s payment system constitutes a taking of private property without just compensation in violation of the United States Constitution and the Connecticut Constitution. Our member facilities have a fundamental right to be justly compensated for the quality services they provide. The longstanding Medicaid funding shortfall and its unfair consequences are well-documented as private payers, Medicare beneficiaries, and nursing homes have been forced to subsidize Medicaid’s failure to pay its legitimate fair share of these costs. In shifting the financial burden, Connecticut has achieved a considerable benefit by not paying for the benefit, while imposing the cost, like a stealth tax, on a shrinking group of nursing home residents and their families, our employees and our facilities. The CAHCF lawsuit exposes this policy for what it is–an unfair and unlawful tax on a few to subsidize Medicaid costs that ought to be, but are not, paid by the State.”
Rell must make a formal response to the lawsuit by February 18.