News and Tribune

Business/Money

March 23, 2014

Failure of construction moratorium in bill could hurt nursing homes, state rep says

Clere blames fellow House Republicans for succumbing to big money, big business

> SOUTHERN INDIANA — A state lawmaker said the failure of the General Assembly to pass a new nursing home construction moratorium will hurt facilities like Lincoln Hills Health Center in New Albany.

Rep. Ed Clere, R-New Albany, authored HB 1391, which began and ended as an update of the state’s Community and Home Options to Institutionalize Care for the Elderly and Disabled, or CHOICE, program, a bill that now awaits the signature of Gov. Mike Pence. But for much of the legislative session, the bill included language that would have banned the construction of new nursing homes for two years, with exceptions for counties that had bed occupancy that exceeded 90 percent. That language was stripped from the bill in conference in the final hours of the legislative session by Clere’s fellow House Republicans, Clere said.

“Unfortunately in the end, the moratorium died behind closed doors,” Clere said. “It was my caucus, the House Republican caucus, that killed it.”

Clere acknowledges that his support for a moratorium on construction of new nursing homes may seem anti-competitive and anti-business at first, but he said that that’s not the case. Because the state and federal governments set the rate nursing homes are paid from Medicare and Medicaid, the nursing home market is not a free market, he said.

“Medicaid is not a profitable segment of the business, so the concern with construction of new facilities is the new facilities will offer amenities that older facilities can’t compete with and the new facilities will cherry pick the profitable segments of the business, leaving only the Medicaid business for the older facilities,” Clere said. “ ... It’s just a very complex situation, and we’re not doing the state or local communities any favors by allowing overbuilding because the overbuilding is only going to lead to even more empty beds and put more pressure on the system.”

Indiana’s current bed occupancy rate in nursing homes is 74 percent, or about 13,000 empty beds, which is higher than neighboring states according to Bob Decker, president of Hoosier Owners and Providers for the Elderly, or HOPE. HOPE was a supporter of the passage of a moratorium, as were the Indiana Health Care Association, Leading Age Indiana, the Indiana Association of Area Agencies on Aging and the United Senior Action Federations Project, Decker said.

“We’re dealing with just short of a crisis of occupancy and utilization in nursing homes,” Decker said.

HOW IT WENT DOWN

Mainstreet Property Group is blamed by Clere and proponents of the moratorium for its death in the House.

On Feb. 7, Mainstreet issued a news release in which it announced plans to construct 24 new facilities that would fall under skilled nursing, the same category as existing nursing homes. Mainstreet promised the addition of 3,000 new permanent jobs, 8,400 temporary jobs and an economic impact of about $3 billion.

“With millions of Americans aging into retirement and beyond over the next 20 years ... there’s significant opportunity for those who can bring innovation to the tired, existing models of health care,” Mainstreet Chairman and CEO Zeke Turner said in the release. “This is especially true for those who focus on rehabilitation and therapy and on getting people well and back home where they want to be. That’s Mainstreet’s unique business proposition and what is fueling our rapid growth in Indiana and beyond.”

Clere called Mainstreet’s announcement a “game changer” in the policy debate.

Rep. Eric Turner, the second ranking member of the House Republican Caucus, is Zeke Turner’s father. Rep. Turner is accused of lobbying his fellow Republicans in the house to remove the language from HB 1391 in conference by two Republicans who spoke on condition of anonymity, according to a March 18 report in the Indianapolis Star.

“We had agreement from the other three caucuses on the two-year moratorium, meaning the Senate Republicans, the Senate Democrats and the House Democrats had all agreed to the two-year moratorium with the 90 percent exception provision,” Clere said, “and it was only the House Republicans that opposed it in the end and ultimately killed it.”

The Indiana Democratic Party has called for House Speaker Brian Bosma to investigate Turner’s actions relating to the moratorium.

MAINSTREET’S RESPONSE

Mainstreet isn’t building new nursing homes, but instead is building new short-term care facilities, which the company touts as a new and unique approach to senior health care, according to Kate Snedeker, a public relations specialist contracted by Mainstreet.

“They continue to miss the point that while our properties are licensed under skilled nursing, what we are introducing in markets across Indiana ... is a completely new product in health care, focused on short-stay rehabilitation,” Snedeker wrote in correspondence with the News and Tribune. “The often-quoted 74 percent is irrelevant to this discussion, as that focuses on a different population entirely, those who would not use the same properties we are building.”

Snedeker also disputed the claims asserted by Clere and Decker that the construction of Mainstreet’s new facilities would impact the profitability of existing nursing homes.

“Profitability is not an issue with nursing homes,” Snedeker wrote. “We routinely see financial statements in the industry that indicate profit margins of traditional nursing homes are higher than they have been in a long time.”

Snedeker declined to comment on behalf of Mainstreet regarding Rep. Turner’s alleged lobbying activity to remove the moratorium language from HB 1391, but acknowledged that Rep. Turner is Zeke Turner’s father and stated that Rep. Turner is not involved in the operation of the company.

 

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