Opinion

Fixing Nursing Homes Demands Transparency, Trust and Liability Relief

No one is arguing that America should be satisfied with our current nursing home system. But we can expect to hear a cacophony of argument on how to fix it over the coming months and perhaps year.

Nursing home operators will rightly point to chronic underfunding and the failure to address the real costs of long-term care for poor, frail seniors on Medicaid. Their critics will demand more regulation and enforcement, higher staffing requirements and better wages. Some will argue that any additional funding for long-term care should go to home and community-based services. If unfunded increases in requirements for nursing homes lead to increased rates of bankruptcy — and closures — across the sector, so be it.

It would be careless and unrealistic to argue that the skilled nursing industry is without value. Harvard’s David C. Grabowski, among other experts, has argued that it is necessary, and requires increased investment. Studies show that Americans are growing older and more frail; many have no family or are beyond the capabilities of those that they have, increasing numbers are homeless and millions will require 24/7 care, often in specially equipped and staffed facilities. Furthermore, as highlighted in the landmark “Forgotten Middle” study conducted by NORC at the University of Chicago, a giant influx of middle-class seniors is coming. Neither qualifying for Medicaid nor being able to afford private-pay seniors housing, many will “spend down” their resources and rely on Medicaid. That is simply not a tenable solution.

Twenty years ago, another industry crisis precipitated a dramatic decrease in the availability of skilled nursing facilities. Lawsuits had become so damaging that nursing home operators began to flee certain states in which plaintiffs’ attorneys, seeking insurance-mandated settlement payoffs, triggered a feeding frenzy. Insurance for operators became either unaffordable or unobtainable. As a result, many families who found themselves unable to care for an elder at home were left without appropriate options, unable to secure care for their loved one at any price.

In response, nursing home owners and operators began to develop limited liability partnerships in increasingly complex — and opaque — business relationships, all designed to shield assets from trial lawyers. That system exists today in many places, particularly with respect to larger, multi-facility operators. It enables these businesses to exist — but it also raises questions as to where the money is going.

This is why I have been advocating for even greater transparency throughout the long-term care industry. To be entrusted with a greater investment from government, owners and operators of care facilities must open up their books and allow regulators and policymakers to see that their investment is going to increased staffing, pay and benefits for those on the front lines, as well as toward improvements in technology, and enhanced infection prevention and control. In short, they need to build trust in order to gain dollars.

But should skilled nursing providers provide real transparency into their financials, without liability reform or relief from lawsuits? It would only benefit the same attorneys who benefitted from transparency in the 1990s. It would quickly become impossible or prohibitively expensive to get insurance again — and again, operators would seek to protect themselves. And again, dollars intended to go to the care and housing of our low-income seniors would go instead to ever more expensive legal actions or insurance premiums.

This is where policymakers must step up. Without liability protections, increased transparency will lead only to increasing costs, as opposed to improving the wages and benefits for front-line workers. The real losers will be the millions of poor, frail, complex-care residents who need 24-hour care, and the staff to care for them. Operators will have to agree to greater transparency and accountability. Advocates will have to understand that targeted liability relief is essential. Policymakers hold the keys to both sides working together.

 

Robert Kramer is founder and fellow at Nexus Insights and co-founder, former CEO and now strategic adviser at the National Investment Center for Seniors Housing & Care. 

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