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Asm. Wood Introduces Bill to Maximize Skilled Nursing Facility Revenues on Residents' Care

Bill establishes a direct care spending requirement of 85 percent

For immediate release:

SACRAMENTO–Assemblymember Jim Wood (D-Healdsburg) has introduced AB 1537 to ensure that skilled nursing facilities (SNFs) spend a minimum of 85 percent of non-Medicare health revenues from all payer sources in each fiscal year on direct care services for residents.

“Revenues for skilled nursing facilities in California approach $11 billion and these facilities are home to nearly 100,000 of our most vulnerable Californians,” said Wood. “We have a responsibility to ensure that they are receiving the best care and given the dignity they deserve.”

According to California Department of Health Care Access and Information (HCAI) data, SNFs spend an average of approximately 64 percent of revenues on direct care services and 36 percent on non-direct care services.

“The goal of AB 1537 is to ensure that skilled nursing facility revenues spend a dedicated percentage of their revenues on the direct care of residents, and while there are some financial controls on Medi-Cal spending, there are no controls on spending for private payers,” said Wood.

In 2020, nearly $1 billion in revenues was paid to what is referred to as “related-party” companies for services provided to SNFs, according to HCAI data. Related-party companies all share a percentage of common ownership or control with the SNF owner.

“About 60 percent of SNFs are owned or leased by multi-facility organizations that have increasingly complex ownership structures, including related-party companies,” said Wood. “These complex business structures allow SNF owners to pay themselves, and even their family members, rent on buildings they already own, to charge their SNFs hundreds of thousands of dollars for undefined management fees and administrative services and to loan themselves money that may never be repaid.”

“If this bill had been law in 2020, it would have shifted more than 20 percent of the nearly $11 billion in nursing home revenues to direct care services and away from owner profits and administration, allowing the money to be spent on taking better care of residents by increasing staffing levels and improving other services.” said Charlene Harrington, RN, PhD, professor emeritus at the University of California, San Francisco and noted scholar and author in the field of long-term care, and a member of the Geriatric Circle.

“SNFs owners are using related-party companies to make themselves millions, hiding profits in other companies they own, while at the same time decreasing staffing in facilities and risking the lives of residents,” said Wood. “This bill will require that a larger percentage of revenues – keep in mind the bulk of which are government funds – go directly to patient care, and prevent unethical SNF owners from reaping excessive profits at the expense of California’s most vulnerable residents.”

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