Nursing Homes In Trouble

(CBS)  The track record of the Floridean Nursing home is almost as spotless as its floors. But financial pressures are mounting on Miami's last family-owned nursing home.

"We've been here for 56 years and its been in my family for that amount of time, for four generations," says administrator Kelly Rice-Schild.

"Never had a lawsuit, but our insurance–liability insurance–went up 300 percent. Why?" asks CEO Frank Rice.

It's mainly because families and advocates for the elderly are bringing more multimillion-dollar lawsuits against nursing homes accusing them of abuse and neglect.

In many ways, well-respected, family-operated homes like the Floridean are paying for the sins of their corporate cousins. To stay in business, they're forced to turn away patients that can't pay their own way.

"The industry right now is in a crisis. It's in a crisis they've created. We have a crisis in care. We don't have a litigation crisis," says attorney Jim Wilkes.

The nursing homes are fighting back.

They claim lawsuits are only part of the problem and that government cutbacks also are driving them out of business.

The cuts are an attempt to save money, in large part, by cracking down on over-charging for Medicare services.

The Balanced Budget Act of 1997 changed the Medicare payment system with the goal of trimming $9.5 billion. But the nursing home industry says the real amount could reach $16.6 billion.

And states have slashed Medicaid payments as well.

"They pay about $4 an hour for a Medicaid resident which is less than I pay my babysitter to watch my kids," says Rice-Schild. "If Medicare keeps getting cut, cut, cut then you offer less, less, less. You don't have a choice."

That's hardly a solution for most facilities and those who need them because 75 percent of patients couldn't afford to stay in a nursing home without Medicare or Medicaid.

Within the last year, nearly 1,700 nursing homes–with the vast majority owned by four of the biggest nursing home corporations–have filed for bankruptcy.

A recent federal study found that if the big chains hadn't gone on a nursing home buying binge when they knew the cuts were coming, they might not be in trouble now.

"The industry will complain about financial problems but it won't admit its own fraud and mismanagement that caused them," says patient advocate Barbara Hengstebeck.

The amount of fraud is staggering. For example, the government recently filed a billion-dollar claim against Vencor which runs nearly 300 nursing homes.

"The industry says protect our parents but what they really want is to protect their profits," says Hengstebeck.

Read Part II of this story: Caring for the Elderly From the Home

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