Grassley: Bankrupt Nursing Home Chains Must Justify Funding Requests

Nursing home companies in bankruptcy must prove a lack of patient access to care before Congress approves any funding increases for them, Sen. Chuck Grassley, chairman of the Special Committee on Aging, said today.

"Nursing home companies in bankruptcy often blame the government for their financial problems and want more money," Grassley said. "I'm not convinced that those companies need more money. The test is whether patients have access to adequate nursing home care. If they do, then the taxpayers' contribution to nursing home chains is adequate as it is."

Grassley's comments came after a hearing, "Nursing Home Bankruptcies: What Caused Them?", at which experts testified about what caused five of the nation's 10 largest nursing home chains to file for bankruptcy in the last year. The five chains in bankruptcy represent 10 percent of the nation's nursing homes.

Witnesses described many factors that contributed to the bankruptcies of large nursing home chains, including:

• Business decisions based on a belief that Medicare payments would continue to increase without limit, as in the past.
  
• The overuse of therapies and related services at inflated costs, which the old cost-based Medicare payment system encouraged.
  
• Enormous debt burdens created by aggressive merger activity.
  
• Private payers, such as health maintenance organizations, negotiating tough contracts.
  
• Competition from alternatives such as assisted living and home care.
  
• Decreased revenues due to efforts to fight fraud, waste and abuse in the health care industry.
  
• Litigation and related insurance costs.
  

  Grassley said the taxpayers contribute $39 billion in federal money to nursing homes via Medicare and Medicaid, most from Medicaid. At his request, the General Accounting Office is studying how nursing homes spend this money. The GAO's report is expected early next year.

  "As we've heard, some corporate executives, their investors and bankers gambled on a vision of ever-growing government largesse," Grassley said. "They got hurt because this vision wasn't based on reality. Others took a more cautious approach, and now they're well-positioned to operate in the new era of tightened Medicare budgets. As Congress listens to pleas from nursing home executives for more Medicare funds, we must keep this complete picture in mind."