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Funding Program Shields Nursing Homes From Lawsuits

Hundreds of Texas nursing homes have transferred their ownership to local government entities in order to secure more federal Medicaid funding. Critics of the arrangement say it shields negligent nursing homes from lawsuits.

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The nursing home industry has never accused Texas of being too generous with its Medicaid dollars — the state is among the worst in terms of the money it reimburses such facilities for providing care to needy Texans. 

So when a program began in March that allowed nursing homes to receive supplemental federal funding, hundreds of Texas facilities quickly signed up.

There's a catch to the "Minimum Payment Amounts Program": To draw down those funds, nursing homes have to be government-owned — generally by a local county or hospital district. Increasingly, nursing home companies have begun entering into these arrangements, managing care under their new license "owners," and sharing the federal cash with them.  

The long-term care industry has hailed the program as a mutually beneficial way to secure desperately needed public funds, particularly for facilities in rural areas. 

But critics have called attention to it, saying the program jeopardizes the safety of elderly Texans by shielding negligent nursing homes from lawsuits. Because Texas places strict limitations on lawsuits against local governments, trial lawyers argue, the arrangements have left nursing home residents with few protections.

“There’s just no economic incentive" to sue for damages against a local government, said Guy Choate, a San Angelo-based attorney. "You can pretty much assure yourself that somebody else’s mom is going to die, because there’s no real disincentive for these nursing homes to avoid some pretty egregious stuff." 

The program is likely to be short-lived: Lawmakers added a provision to the state budget last week that would end it in September 2016, replacing it with a quality improvement program that would dole out enhanced payments regardless of whether a nursing home was publicly or privately owned. 

But it has already had an immediate impact in Texas, where the number of nursing homes owned by local governments has increased by about 200 over the last year, according to data from the Department of Aging and Disability Services. That’s roughly one-fifth of licensed nursing homes in the state.


Some local entities have taken ownership of dozens of nursing homes, even ones far outside their geographic jurisdiction. The Coryell County Memorial Hospital Authority, based in Gatesville, is listed as the owner of 21 nursing homes in the directory of facilities regulated by the state — the most of any local entity — despite a county population of about 75,000. Its nursing homes are located everywhere from Austin to Dallas to Jacksonville, between 100 and 150 miles away.

Participation in the program "definitely increased a lot — more than we anticipated that it would,” said Linda Edwards Gockel, a spokeswoman for the Texas Health and Human Services Commission (HHSC), which administers the state's Medicaid program. “Money talks,” she added.

Indeed, the financial benefits have been crucial to improving the quality of care nursing homes can provide, said Kevin Nolting, a consultant who has worked with local governmental entities to draw down funding under the program. 

“A lot of these nursing homes are in small, rural towns, and some of them, we know for a fact, said, ‘We were on the chopping block to be closed before the influx of these new monies,’” he said.

The benefit of reduced liability, he added, was circumstantial. 

“The impetus for this program was never really to try to create a more favorable litigation environment,” Nolting said. “It was always related to trying to find these additional revenues that would, in essence, help the operations and the services.”

But Choate, the attorney, said the reduced liability has been dramatic and dangerous. Under Texas law, to sue for damages against a local government, a person must prove he or she was directly harmed by the "use of tangible personal or real property." That would not apply in a situation where a nursing home resident was injured because an employee left a door unlocked, Choate said, or if a resident got bedsores from spending too much time on a mattress. Additionally, Texas tort law caps damages at $100,000 for local governmental entities, which lawyers say makes it not worth the cost or effort of going to court.

“I can’t imagine suing a county for almost anything when your cap is $100,000,” Choate said. 

David Byrom, chief executive of the Coryell County Memorial Healthcare System, said the arrangement between his hospital authority and its 21 nursing homes was meant to improve care at the facilities. State officials say the program's intent was to improve coordination and continuity of care between hospitals and nursing homes — a point Byrom agreed with, adding that nursing home liability “hasn’t really been a strong consideration at this point.”

But critics like Austin attorney J.T. Borah say the arrangement is suspect, particularly given how far away many of the nursing homes are from their owner hospital districts.

"This would place a huge burden on family members who are wanting to be very involved in their relative’s care," he said in an email. "This cannot ‘improve the quality of care.' I am not sure how much ‘improvement for the quality of care’ of the patients is involved with these purchases.”

Scrutiny of the program comes at a time when state leaders are debating how best to regulate the nursing home industry. Texas, with its relatively meager Medicaid reimbursements, is home to the highest percentage of nursing homes rated “below average” or “much below average” by the federal government, according to an analysis by the Kaiser Family Foundation.

State Sen. Charles Schwertner, R-Georgetown, filed a bill this session that would revoke the licenses of “bad actor” nursing homes with repeat safety violations. Schwertner has said the bill was prompted by a critical report that found that state regulators took enforcement action in less than 1 percent of the almost 38,000 cases of nursing home violations confirmed by staff in fiscal year 2013.

Kevin Warren, president and chief executive of the Texas Health Care Association, which lobbies for nursing homes, said securing additional funding for nursing homes was necessary for investments in high-quality care. According to HHSC, the average Texas nursing home is more than 30 years old.

Warren estimated that the Minimum Payment Amounts Program allowed nursing homes to collect an additional $70 to $100 in Medicaid payments per resident per day, depending on the circumstances, which he said helped with “staffing and capital investments.” He declined to comment on the changes to nursing homes' legal liability.

“The facility still maintains the responsibility to care for their residents,” he said.

On that point, trial lawyers agree.

“These people are absolutely at their mercy,” Choate said. “And there’s nobody in society who’s more vulnerable than people in these nursing homes.”

This story was produced in partnership with Kaiser Health News, an editorially independent program of the Henry J. Kaiser Family Foundation, a nonprofit, nonpartisan health policy research and communication organization not affiliated with Kaiser Permanente.

Disclosure: Guy Choate is a donor to The Texas Tribune. The Texas Health Care Association is a corporate sponsor of the Tribune. Find a full list of donors and sponsors here.

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Health care Politics State government Charles Schwertner Health And Human Services Commission Medicaid State agencies Texas Legislature