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Nursing homes attempt to charge booze, ski tickets to state

California Watch
By Christina Jewett
April 19, 2010

Spa treatments in Hawaii, a flight to the Middle East and $13 million in bonuses for an executive and his family.

None of these were what California lawmakers had in mind for California's neediest seniors when they changed the way nursing homes were funded in 2004.

But according to audit and court records, that's exactly what nursing home home owners sought. The nursing home Quality Care Act of 2004 eliminated a flat-fee payment system in favor of one that allows nursing home owners to report their costs and get reimbursed.

State officials have refused to pay for these items and others they deem unrelated to patient care in California. But that does not prevent nursing home owners from appealing those decisions and billing the legal fees to the state, a cost category that Medi-Cal officials do not track. (UPDATE: Medi-Cal says they only pay these legal fees if the appealing party wins, a scenario that hasn't happened yet.)

The new payment system was built to reward nursing home owners for hiring more workers and giving raises to staff. But some owners of the state's 1,100 nursing homes had different ideas.

One such owner is John D. Lund, who allegedly submitted cost reports for landscaping, interior design and welding inspection bills that were not, as the report suggested, for a Sacramento nursing home. The work was actually completed on Lund's sprawling Santa Barbara County estate, an affidavit filed in Sacramento Superior Court says.

Lund, who owns six Sacramento-area nursing homes, faces 18 felony counts of perjury, defrauding Medi-Cal and filing false reports, court records show. Among the items he included in nursing home cost reports: spa treatments in Hawaii, ski trips to Utah, and a sleigh bed and chandelier for his home, records show.

Lund was living in such luxury that when attorney general's investigators went to arrest him, a prosecutor said, Lund pointed out the home of one particularly well-heeled neighbor: Oprah Winfrey. But Lund was not actually reimbursed for the personal expenses he billed to the Department of Health Care Services. The agency subtracted the personal items before setting his homes' payment rates, Deputy Attorney General Bernice Yew said.

Lund's attorney, Paul Wolf of Oakland, said his client did not intend to increase his reimbursement rate. "We want to make it right and go forward," Wolf said of the pending case.

One Los Angeles-based nursing home consulting chain, Longwood Management, attempted to bill the state over two years for $6 million and then $7 million in "bonuses and benefits" for the company's owner and relatives, according DHCS spokesman Anthony Cava.

The department deducted the $13 million in charges from Longwood's ledger, but the company has appealed and is in the midst of a confidential process.

Another twist in the new law: Nursing homes that appeal unwelcomed audit conclusions can bill their legal fees to the state. Some critics of the law say that by allowing this, it negates the entire purpose of the audit - which is to save the state money. (Nursing homes can also bill legal fees spent fighting abuse allegations, as we reported yesterday. Also see our accompanying database.)

Calls to Longwood Management, which runs more than 30 homes in and around Los Angeles, were not returned.

A review of state audit reports show other items that auditors refused to pay for because they had no link to patient care in California. Those include an executive's $1,900 flight to the United Arab Emirates, a $68,000 bill for luxury vehicle use and thousands in special-interest and political contributions. The state also refused to reimburse a chain for an $85,000 executive retreat where lectures focused on boosting revenue and alcohol was included in the tab.

For its part, the Department of Health Care Services audits each nursing home each year, although only one-third of the audits examine owners' receipts, like Lund's, for season tickets to Sacramento Kings games.

More audits may not be the answer, though, said Kris Vosburgh, executive director of the Howard Jarvis Taxpayers Association. He said the most effective way for the state to telegraph that it cares about public spending is for the attorney general's office to make an example of an errant nursing home owner.

"I don't mean to imply that they should persecute the innocent," Vosburgh said. "But if they find people who are literally cheating the taxpayers, then law enforcement needs to come down on those cheaters like a ton of bricks."