As financial transparency continues to be one of the top nursing home reform initiatives of state and federal officials, Connecticut Governor Ned Lamont has taken this push one step further with the potential use of forensic audits.
Gov. Lamont introduced a bill to authorize the use of forensic audits when the state Department of Social Services reviews operator annual financial reports, according to an article published by the Rhode Island Current.
Such audits would highlight areas of risk or fraud in fiscal records, and evidence would be used in legal proceedings. The legislation was spurred by concerns that operators are funneling government funding into limited liability companies or ancillary businesses in which they own a share, instead of resident care.
In turn, this practice allows for rents and management fees to be inflated, legislators said. However, further insight into the movement of funds is reduced because currently, the department’s ability to conduct audits is limited.
“Nursing homes can, under the current statute, say, ‘We don’t necessarily have to give you all of the things that you’re looking for,’” Andrea Barton-Reeves, the Connecticut Social Services Commissioner, told the Rhode Island Current.
A forensic audit would allow the department to do a more expansive look into finances and ask for records such as bank statements or a list of vendors with overdue payments.
Matthew Barrett, president and CEO of the Connecticut Association of Health Care Facilities, said longstanding, legitimate health care business arrangements shouldn’t always be characterized as nefarious and wrong – or be linked to poor quality – without additional studies into the matter.
He said facilities already provide a great deal of information in their financial reports, but are open to discussions of further reforms.
Matthew Lew, CEO of Athena Health Care Systems, told the Current that legislators are looking to improve financial transparency because the industry hasn’t been open about its financial dealings. Athena is one of the state’s largest nursing homes, and Lew has a background as a forensic accountant.
Reforms enacted last year require Connecticut providers to submit narrative summaries of profit and loss statements going back three years, the report said, along with total revenue and expenditures, assets, liabilities, short and long-term debt, and cash flows from investing and financing.
Rep. Mitch Bolinsky, ranking Republican on the legislature’s Aging Committee, said lawmakers need to go deeper than this. Lawmakers don’t have visibility into the “layers,” he told the Current. The bill should focus on “sharpening” previous legislation, he added.
“If we take away somebody’s ability to shelter money in one way, but we don’t have the transparency and reporting to see what their next move is, they’ll just stick it into the next bucket,” Bolinsky said. “Forensically, there has to be reporting, and there has to be some mechanism for enforcement.”
Coupled with a move for more financial transparency are efforts to dictate where funding would go, similar to other states requiring a certain percentage of funding to go toward staffing.
Financial transparency bills have been brought up in New Jersey, California, Florida and Illinois as well even before the Biden administration made it a priority at the beginning of 2022.
Another measure, co-sponsored by Martin Looney, would require nursing homes to spend at least 80% of Medicaid funds on direct care of residents – there was an amendment to the bill earlier this month requiring a study of the issue. In the meantime, the state’s Aging Committee plans to form a working group of financial experts to review financial records and question nursing home owners on how funding is being spent.
Nursing homes in the state currently spend about 51% on direct care, according to the report.
Companies featured in this article:
Athena Health Care Systems, Connecticut Association of Health Care Facilities, Rhode Island Current
