Upstart developer battles nursing home establishment

Nursing home companies went on a building spree in Indiana, and now most of them want the Legislature's help reining in high operating costs brought by over-capacity.

Established players in the industry are pushing for a moratorium on future construction, but one well-connected upstart hopes to thwart the effort. Mainstreet Property Group, founded by Zeke Turner, the son of Republican state Rep. Eric Turner, is fighting a moratorium bill filed by Republican Sen. Patricia Miller.

Turner's company builds hotel-like skilled-nursing facilities that take direct aim at the decades-old institutions operated by his competitors. He believes the moratorium is driven by their inability to keep up.

“It’s like Blackberry telling Apple, ‘We just need to cool off for a few years and have a moratorium against you,’” Turner said.

But Miller and the long-term care lobby say Turner's free-market argument doesn't make sense for an industry that's heavily regulated, from reimbursement rates for Medicaid and Medicare to the criteria for admission to a nursing home.

“The state is highly interested in quality care,” said Miller, who is chair of the Senate Health and Provider Services Committee. The committee is scheduled to hear Senate Bill 173 Wednesday morning.

Miller backed a moratorium in 2011 as well, but Turner, along with the construction industry, fought it off. The issue brought to light the Turner family's close ties to the industry and state government. Eric Turner sits on the House Public Health Committee, as well as Ways and Means, either of which might receive the bill if it passes the Senate.

Turner abstained from voting on the 2011 moratorium bill when it was before Ways and Means.

Turner's sister, Jessaca Turner Stults, is former general counsel for the Family and Social Services Administration and now is a lobbyist whose clients have included a nursing home company.

This year Mainstreet, construction-industry professions and trades are working together as the Indiana Alliance for Quality Senior Living.

Nursing home lobbyist Vince McGowen, chairman of Hoosier Owners and Providers for the Elderly, representing companies based in Indiana, said passing a moratorium could be difficult because Indiana hasn’t imposed one since 2006, and many lawmakers don’t understand the regulated nature of the industry.

The last moratorium expired in 2008. The Legislature passed another one in 2011, but it applied only to Medicaid-certified beds.

Moratorium advocates point to the statewide occupancy rate, 74 percent, as a sign that the system is over-built, creating inefficiency in the use of Medicaid and Medicare funds and stretching nursing home staffs.

“It is about high-quality staffing that means the world to families,” said Scott Tittle, president of the Indiana Health Care Association, which represents for-profit and not-for-profit long-term care providers.

Most of the 520 nursing homes in the state accept Medicaid, which covers their staffing costs at a lower rate than does private insurance, Tittle said. When beds sit vacant, the nursing home’s overhead costs go up, and they can’t invest in training and technology, he said.

Currently there are nearly 50,000 nursing home beds in the state, and 13,000 are vacant.

Competition could solve the vacancy-rate problem on its own, if some nursing homes end up going out of business, Tittle said. But he argues that scenario would leave Indiana with another problem – access to nursing homes for Medicaid patients.

Most newly constructed facilities are certified to accept only Medicare or private insurance, Tittle said.

Mainstreet's buildings don't look like typical nursing homes, nor do they operate like them. The facilities, operated by a third party, take private insurance and Medicare. The rooms are a mix of assisted living and short-term rehabilitation, what Turner called “skilled-nursing light.”

“If someone does go out of business – and that’s a real concern – then you have an access problem,” Tittle said. “Let’s hit the pause button and allow the market to stabilize.”

Indiana spends about $10 billion a year on Medicare, the program for senior citizens that’s funded by payroll tax deductions, and about $7.5 billion on Medicaid, which is for low-income and disabled people of any age. Most of that money goes to hospitals, but it also goes to nursing homes, which are a relatively costly way to care for people, Miller noted.

Continuing to build nursing homes would draw resources away from home-based care and other alternative settings, which are what patients want anyway, Miller said.

Her bill does not affect assisted living. It also would allow existing nursing homes to be replaced, and it provides an exemption for “continuing care residences,” which are typically high-end campuses that draw healthy residents with the guarantee that they won't have to move if they need skilled nursing later in life.

“The Turners can build assisted living,” Miller said.

While Turner argues that the long-term care providers fear a new "product," Tittle said the style of buildings is irrelevant to quality of care. Many decades-old nursing homes earn high marks in the state's report cards, he said. The companies that want a moratorium are involved in providing care, while those who oppose it are in the construction business, he noted.

Mainstreet has built 12 facilities in Indiana since 2008, but it's not the only company that was doing so. There have been 21 new nursing homes built since 2011, Tittle said. Many were built by companies now lobbying for the moratorium.

Asked why his members continued to build, if vacant beds pose such a threat to the system, McGowen said, “Providers will always follow the rules. There has been some growth because that was permitted.”