Florida's nursing-home crisis is about money. All kinds of money. It's about insurance premiums that have increased tenfold in one year. It's about Medicaid, the primary financier of Florida's long-term care system, that today covers only 88 cents of every dollar spent to run a nursing home.

It's about nurses' aides who can earn more as supermarket cashiers and suffer less aggravation. And it's about nursing-home corporations that, for years, siphoned millions out of Medicare, then used the money for rapid expansions -- until the money dried up and left them in bankruptcy court. It's a big, complicated mess of a problem, years in the making. And it won't go away by passing legislation making it more difficult for residents and their families to sue.

"It's a case of several trends turning against nursing homes at the same time," said Henry Aaron, a senior Brookings Institute fellow specializing in public finance and health-care taxation. "Government reimbursements are screwed down. . . . They have to find a way to make their revenues cover their costs."

Ned Black, who has been selling insurance to Florida nursing homes for 15 years, is more direct.

"It's all about greed," said Black, senior vice president of Seitlin. "Everyone thought they could make lots of money -- lawyers, nursing homes, insurance companies -- everybody. Instead, it's become about killing the goose that laid the golden egg."


Along with the growing number of million-dollar legal settlements against nursing homes, the money problem most likely to be taken up in the two-month legislative session that begins today is escalating insurance premiums.

An analysis by Aon Worldwide Actuarial Solutions of for-profit, corporate-run nursing-home chains found that Florida's loss cost, or the cost of defending and settling claims, was more than eight times the national average. Because cases can be filed under a liberal Resident's Rights law rather than medical malpractice, and damages are unlimited, Florida homes are more likely to be sued.

Black said even the small family-run South Florida homes he insures saw their premiums go up overnight; one saw an annual premium increase of about $300 per bed to $3,000. Or homes can't find any coverage they can afford.

"It's a tough, tough business right now," Black said. "Facilities are being forced to make a choice between going without insurance and taking a chance or paying $65,000 a year and going bankrupt."

But the nursing-home industry did not find itself in this financial hole overnight. A lot of parties, including the homes, were responsible for digging it, according to federal and state studies and congressional reports during the past year.


Since the early 1990s and before spiraling insurance costs, a number of factors shaped the financial disaster that needs fixing today. Among them:

Nursing homes depend heavily on Medicaid, as about two-thirds of Florida's 70,000 nursing-home residents have their care paid through this program for indigents -- including many middle-income seniors who shift their assets to make themselves eligible. But while Medicaid reimbursements have risen 61 percent in 10 years, to an average of $116.91 per patient per day, operators say it is not enough. Changes in rate structures and reductions in incentive payments chipped away $127 million in nursing-home funding from 1989 to 1997, a state Medicaid panel found.

Figures for the Florida Association of Homes for the Aged show facilities lose $15.74 per patient per day. Eighty-two percent of homes last year didn't get enough from Medicaid to cover expenses, compared with 54 percent a decade ago.

During the early 1990s, largely for-profit nursing homes seized the opportunity to make more money off Medicare, the federal insurance programs for seniors, by taking on more short-term patients being forced out of hospitals earlier by changes in Medicare hospital reimbursement.

Many of the for-profit chains, such as Integrated Health Services that has filed for Chapter 11 bankruptcy, put the cash into expansion. That gave Florida one of the highest ratios of for-profit beds in the country, at 85 percent. These companies also started therapy clinics and other ancillary services and then referred their own residents.

But the Balanced Budget Act of 1997, enacted to curb runaway Medicare billing for skilled nursing care, dramatically cut payments and left highly leveraged corporations with a sprawl of new ventures to support.

Today, six of the eight publicly traded nursing-home chains operating in Florida and controlling 23 percent of the beds are in bankruptcy court, although they are still in business. One, Lennox/Newcare, has pulled out of Florida.