Iowa nursing homes reimbursed for legal fees when sued, cited

Legal fees that Eastern Iowa nursing homes pay to fight abuse and neglect citations are reimbursed by the state and federal government - win or lose.

Eastern Iowa nursing homes sought Medicaid reimbursement for more than $2.2 million in legal fees, accounting fees and professional services in 2010.

The fact that nursing homes get reimbursement, even if they lose citation appeals or lawsuits, doesn't sit well with Marlys Ingles, a Cedar Rapids woman whose mother died in a Marion nursing home in 2005.

“It just seems ridiculous that taxpayer money would be spent to defend them against state citations, especially when (allegations) are founded,” said Ingles, 60.

She sued Crestview Acres, 1485 Grand Ave., after learning staff there did not try to resuscitate her mother after a heart attack, despite written orders from the patient and doctor, according to the lawsuit filed in Linn County District Court.

Ingles, who settled with the nursing home in 2008, wishes Iowa law would prohibit reimbursement for legal fees when nursing homes lose court cases or citation appeals.

The Medicaid division of the Iowa Department of Human Services drafted a proposed rules change in late 2009 or early 2010. The proposal would have forbidden reimbursement for legal fees when a nursing home is defending itself against a criminal or state civil action that it loses or when the Iowa Department of Inspections and Appeals succeeds in suspending or revoking the nursing home's license.

The rules change also would have prohibited reimbursement for legal fees, expenses and costs for lobbying Congress or the Iowa Legislature.

Whether these changes still are being considered by DHS is unclear. New drafts have not been made public, and DHS does not have a timeline for presenting proposed cost-report changes.

Legal fees an allowable cost

Iowa nursing homes file annual cost reports requiring detailed information about revenue, expenses, equipment purchases, assets and employee statistics.

Line 14 of the cost report allows nursing homes to claim expenses for legal fees, accounting fees and professional services.

The 40 nursing homes within a 50-mile radius of Cedar Rapids filed Line 14 claims totaling $2.22 million for 2010. The reports were obtained after an open records request to DHS.

The highest Line 14 claim for the Eastern Iowa nursing homes was $236,351 from the 115-bed Monticello Nursing and Rehabilitation Center. The lowest was $2,150 from the Linn Manor Care Center, a 38-bed home at 1140 Elim Dr., Marion. The median claim was $37,264.

Legal fees are considered an allowable cost and are included in the calculation of the nursing home's per-bed, per-day Medicaid reimbursement rate. The amount of allowable costs the federal and state government actually pay the nursing home depends on the share of its residents who are eligible for Medicaid.

“Nursing homes and other providers are entitled under federal law to appeal adverse actions taken by government regulators - in short, due process,” DHS spokesman Roger Munns said by email. “The cost of defending themselves is considered an allowable cost, whether they win or lose.”

Because legal fees are lumped together with accounting fees and professional services on Iowa's cost reports, the public can't tell how much money goes to attorneys. Other Midwestern states have similar laws allowing reimbursement of legal fees, but some states - including Minnesota - list legal fees as a separate line item for easy tracking.

Iowa nursing homes pay lawyers for a variety of services, including reviewing personnel files, giving advice about federal and state laws, and analyzing contracts, according to a 2007-08 review conducted by the Medicaid division of DHS.

Nursing homes also pay lawyers to fight citations levied by the state, said Andy Johnson, manager with the Medicaid division of DHS.

An unfair advantage?

State citations drive up legal costs, one administrator said.

“We had a citation in 2010, and it was overturned,” said Dave Chensvold, administrator for the Monticello Nursing & Rehabilitation Center, which submitted $236,351 in Line 14 claims for 2010. “The amount of money it cost to get that overturned was substantial.”

The nursing home's attorneys prevailed in reversing one state citation, but the home lost an appeal on a separate violation.

In this case, the facility was fined $5,000 after a resident broke his or her hip March 9, 2010, in a fall from a wheelchair. Staff had been trained not to leave the resident unattended, but the fall occurred while the resident was unmonitored, according to the citation filed by the inspections and appeals department.

The resident wasn't taken to the hospital for 14 hours, and when asked 11 hours after the fall if he or she was in pain, “the resident responded, ‘Hell yes,' ” the citation states.

Fighting citations is part of the cost of doing business for a nursing home, Chensvold said. These citations, if upheld, can hurt a nursing home's rating on Medicare.gov, which families consider when selecting nursing homes, he said.

The Eastern Iowa nursing home with the second-highest Line 14 claims was Coralville's Windmill Manor, with $181,516. The 120-bed home was fined $26,000 in July 2010 for a host of citations based on allegations that staff covered up the sexual abuse of an elderly resident.

Crestview Acres, a 129-bed facility in Marion, claimed $15,172 in Line 14 costs in 2010. Administrator Mary Quigley was not working at the nursing home when Ingles' mother, Darlene Hart, lived there from 2002 to 2005. Quigley declined to comment for this story.

Steve Ackerson, president of the Iowa Health Care Association and the Iowa Center for Assisted Living, trade groups representing more than 500 nursing homes and assisted-living centers, said it makes sense for nursing homes to get Medicaid reimbursement for legal bills.

“The federal government allows it,” Ackerson said. “They understand the need to have representation.”

The Iowa Health Care Association doesn't like the state system of requiring nursing homes to appeal to an administrative law judge employed by the inspections and appeals department - the same agency that levies the citations, Ackerson said.

Of 35 contested case hearings involving long-term care facilities this fiscal year, nearly 60 percent have resulted in settlements between the state and the facility. Seventeen percent of the cases were withdrawn, and 9 percent were dismissed. Only 14 percent of the contested citations were sustained, according to the inspections and appeals department.

Other appeals are dealt with informally before the case hearings, but the state stopped collecting these statistics last year because of budget cuts.

Taxes pay for dues, lobbying

Medicaid also reimburses nursing homes for association dues, which means tax money could be paying Ackerson's compensation, which was $278,070 in 2009.

Membership dues accounted for more than $950,000 of the Iowa Health Care Association's budget in 2009, according to the group's tax report. The association provides members with continuing education, group purchasing and lobbying efforts at the Iowa Statehouse and in Washington. The organization paid $67,821 for lobbying in 2009.

Brian Kaskie, associate director for the University of Iowa Center on Aging, isn't surprised that nursing homes include legal fees in their reimbursable operating costs.

“What seems to be at issue is whether the state, on behalf of people who live in nursing homes and other long-term care facilities, has provided sufficient support to pursue cases with due diligence or if families have reasonable access to legal counsel who could represent their interests in such cases,” Kaskie said.

The inspections and appeals department cut 10 of 38 inspectors earlier this year, saving the state $125,000, though most of those employees' salaries had been funded with federal money.