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arrangements of the nursing home industry. In the context of growing public concern regarding corporate governance, nursing home owners/operators could be requested to provide the state with improved financial and ownership information to demonstrate that vulnerable residents are being cared for in stable institutions. Until this occurs, important information (e.g., the identity of bankrupt independent homes) will likely remain hidden from consumers, policy makers, and regulators.  

Our full report outlines policy options that the state’s new Financial Solvency Board may wish to consider to ensure that improved information is collected and analyzed regarding the operation of nursing facilities (e.g., bankruptcy status). Such information could then be made available widely e.g. by posting on a state website (or the website on nursing homes that is being developing for the California Health Care Foundation) or the federal Nursing Home Compare website operated by the CMS. Below we summarize six policy options for consideration:

1. Implement an effective system to enforce and monitor the California Health and Safety Code requirement that facility operators report bankruptcy to the state within 24 hours of filing.

2. Require owner/operators to declare bankruptcy status on annual license renewal applications.

3. Investigate initiatives in other states such as Florida where an ‘early warning system’ is being developed to identify and track the quality and operational stability of failing homes.

4. Explore centralizing, analyzing, and disseminating information on nursing home chains from the following three sources: (i) statements of public corporations available on websites e.g. Securities and Exchange Commission (SEC), (ii) Home Office Cost Reports (administered by CHDS Audit and Investigations Brach) detailing costs charged to chain members by their central (home) offices, and (iii) the annual financial audits conducted on approximately one fifth of California facilities.

5. Although there may be issues relating to professional accounting standards that restrict the potential for the state to require audited accounts from chain organizations, other policy options for assuring accuracy and completeness of OSHPD cost reports are needed. At present, facility representatives (or out of state corporate staff) certify these reports. One policy option would be legislation that requires: a) the certification of those who prepare the reports, and b) a CPA to attest to the preparation of the report.  State oversight of this process could be financed in part from licensing fees and fines collected through the inspection process.

6. Prioritize state plans to analyze nursing home financial, ownership and operational information centrally, disseminate it more effectively to state officials, and dedicate a staff member to the task of monitoring developments.  This effort could be expanded beyond the State of California to include networks of information exchanges regarding the activities of chains with other states and at the federal level.  Patient advocate organizations may prove to be willing and resourceful partners in this effort.  

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