By Thomas Goldsmith
An email from a state official delivered startling news during the first week of January:
“The NC Division of Health Service Regulation reports a balance of $28,952,697.63 in the CMS fines/penalties fund for the quarter ending December 31, 2018.”
In plain language, that email referred to nearly $29 million in a state-federal fund that is sitting mostly unused. The money — including $13 million during the past three fiscal years — has accrued from fines as large as $1.16 million levied by federal regulators against individual North Carolina nursing homes.
The growing millions in the fund are supposed to be spent on programs to ensure better lives for the people who live in the state’s 429 nursing homes. But during the past three years, only $406,057 — about 1.4 percent of the current stash — was spent.
The money went mostly to a handful of smaller-scale “culture change” projects designed to improve residents’ lives at individual nursing homes.
“Pls encourage grant proposals,” read the subject line of the recent email from Becky Wertz, section chief at the Division of Health Service Regulation, Nursing Home Licensure & Certification Section in the state’s Department of Health and Human Services.
The email went to more than 30 nursing-home administrators, advocates for older people and others with a stake in the welfare of long-term care residents.
More than $25 million in fund has gone unused at a time when the state’s 60-plus generation is projected to outnumber those younger than 18 this year. Advocates have argued in vain to the General Assembly that people older than 60 require help — such as transportation and Meals on Wheels — that would add millions to the state’s budget.
“The idea that you use money from fines to improve quality is a good idea,” said Thomas Konrad, a former health policy and research professor at UNC-Chapel Hill who continues to study and consult in long-term care issues. “Preventing people from having to go to nursing homes might be a good use of this money.”
Too few askers
Nursing homes or other parties can get grants from the money, known as “civil moneypenalty,” or CMP funds, after approval from DHHS and the federal Centers for Medicare and Medicaid Services, or CMS.
“Unfortunately, there are not enough applications for use of these CMP funds,” Emery Milliken, deputy director of the Division of Health Service Regulation, said in an email to NC Health News.
“In 2017 and 2018, North Carolina received a total of 24 completed CMP grant applications, which were all approved and submitted to CMS. Ultimately, 22 were approved by CMS.”
North Carolina’s 429 nursing homes vary widely in quality. Nearly a third of facilities received 1 or 2 stars, the lowest ratings under the federal five-point star rating system. State and federal officials have repeatedly pushed efforts to improve the residents’ conditions.
To put the $28.9 million in perspective, it amounts to about two-thirds of the $44 million annual budget of the state’s Division of Aging and Adult Services, which saw its state appropriation fall between the 2016-17 and 2018-19 fiscal years. And more than 10,000 people annually sit on waiting lists (for monetary aid to help them to remain in their homes) paid for in part by the $30-million-plus that North Carolina contributes to Home and Community Care Block Grant services. That block grant, which also receives federal funding, pays for programs that have a goal of keeping people out of long-term care.
How others use it
The civil money penalties fund has a low profile in government affairs; it does not appear in either of the principal state budgets available to the public, the enacting legislation or the joint conference committee report. Information officers at the relevant federal and state departments initially bounced between each other several questions about the amount of the fund and how it is spent.
The public information office at the Centers for Medicare and Medicaid office in Atlanta said the federal government does not track each state’s balance in civil monetary funds. In other states, these funds are used to correct the sorts of large-scale problems — such as understaffing and maltreatment of residents — for which nursing homes are often fined in the first place.
Records show, for example, the state of Massachusetts received approval from CMS to spend $2.1 million in 2017 on two projects. Those programs used $1.5 million to improve quality in underperforming facilities and $600,000 to set up and maintain family councils at nursing homes, with a goal of improving individualized care.
In Kansas, the state Department of Aging and Disability Services won approval to get $4.5 million from its CMP fund to take over operations of 15 nursing homes from an insolvent operator.
In Georgia, $1.6 million from the civil money penalties fund is going to a statewide project in that state’s 374 nursing homes. The grant to the Gerontology Institute of Georgia State University is designed to “create a sustainable model for improving the quality of life for nursing home residents in Georgia” by paying for staff development and training at residential centers.
In North Carolina, as millions in fines for improper practices piled up in the fund, mostly small-scale projects have been supported. In 2017 projects in North Carolina, five grants between $20,000 and $40,000 went toward iN2L, a program with the goal of letting residents use computers to research their interests.
About half of residents in North Carolina’s residential long-term care centers have dementia. Trinity Ridge senior living community in Hickory received $15,932 for iPads that are filled with lists of songs tailored to individual residents with dementia and anxiety.
“The philosophy and orientation of the state has been to fund nursing-home-level projects that generate from the bottom up — they are $20,000 to $30,000 projects,” said Bill Lamb, executive director of the nonprofit advocacy organization Friends of Residents in Long-Term Care.
“You can never spend $28 million that way,” he said. “The other thing, frankly, is the projects have to be reviewed by the regional [CMS] offices across the country and that’s a heavy lift.”
Some larger-scale projects are likely to be approved during the next fiscal year, advocates and state officials said. And CMS says it will complete its analysis of North Carolina’s required annual plan for use of civil money penalties in about three months.
What’s the holdup?
North Carolina’s DHHS and the federal Centers for Medicare and Medicaid Services offered several reasons for the apparent bottleneck in parceling out funds. The state’s Division of Health Service Regulation, or DHSR, is directly responsible for overseeing requests to the fund.
“DHSR has worked hard over the past few years to make sure nursing homes and others are aware of the availability of this funding,” Milliken said. “DHSR also wants this funding to be utilized for its intended purpose.”
Efforts to attract more grant applications have included proposals written by DHSR staff, training at nursing homes, division website ads, outreach to a nursing home trade organization, and presentations to people in training as nursing-home administrators.
“Some of the projects DHSR has initiated include dementia care with reducing antipsychotics, sleep deprivation, reducing falls and SPICE [UNC Statewide Program Infection Control and Epidemiology] webinars,” Milliken said.
According to CMS, each state develops its own plans on how it will “reinvest” the fines paid by its nursing homes. However, the federal agency must approve plans and also has to check annually on whether and how a state is using its pot of money, a CMS spokesman said.
“Each project idea and budget must be reviewed for reasonableness, which may cause rejection of project ideas that do not meet state or CMS criteria,” the spokesman said.
Each state must spend a “reasonable” amount of its penalty funds annually, but no percentage is spelled out.
In addition, states are required to publicize the use of civil money penalties, making known how much is approved for projects, the identities of contractors and the results of projects that receive the funds.
Jeff Horton, executive director of the North Carolina Senior Living Association, said that CMS may keep an especially keen eye on the state because of a 2011 transfer of $2.8 million from the CMP fund to operations at the NC Division of Health Service Regulation. The transfer was within accepted guidelines at the time, but federal bean counters eventually put an end to it.
“They might say, ‘We had to watch NC because one of the years in the budget DHHS said we’re going to use some of that money,’” said Horton, a former department official. “Sure enough, CMS, once they found out about it, they said you’ve got to put that back.”
State budget records show that state allocations replaced the CMP money during the two years following the transfer.
“Pursuing new ideas”
Polly Welsh is executive vice president of the North Carolina Health Care Facilities Association, a nursing home lobbying and trade group. The group has long been aware of the penalties fund and is looking for projects beyond the smaller-scale efforts that equip individual nursing homes with amenities such as aviaries, or large bird cages, meant to entertain and stimulate residents.
“We have been pursuing new ideas to get some grants that could really push North Carolina forward in skilled care, given the demographics of North Carolina as somewhat of a retirement state,” Welsh said.
“The association has been diligently working with universities on the telehealth experience. It is a wave of the future, but it certainly increases access, which is a benefit to the residents.
She also called for workforce development for people to take care of this age group.
“We’re looking forward to trying to bringing some collaborators together — community colleges, universities, and maybe people within the state agencies,” she said.
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Do these funds include fines from adult care and assisted living? Are these facilities eligible for garden or other grants?