Tabor Manor Care Center in Fremont County has filed for bankruptcy while owing the state $1.1 million. (Photo via Google Earth; court document courtesy U.S. District Court)
A for-profit nursing home that has filed for bankruptcy says it owes Iowa taxpayers more than $1 million in fees the state failed to collect.
In May, the for-profit Tabor Manor Care Center in Fremont County filed for bankruptcy, listing $1.3 million in assets and $2.3 million in liabilities.
By far, the 46-bed nursing home’s single largest creditor is the State of Iowa — specifically, the Iowa Department of Health and Human Services/Iowa Medicaid Enterprises. The home has reported that it owes the agency $1,169, 257.
The debt is tied to unpaid Quality Assurance Assessment, or QAA, fees that date back to 2019, according to bankruptcy records.
QAA fees are a mechanism that has been used by the state since 2009 to drive up expenses at Iowa nursing homes. The quarterly fees paid to the state have the effect of artificially inflating a facility’s cost of doing business. That, in turn, enables the facilities to draw down more money in Medicaid reimbursement from the federal government for resident care.
By design, the increased revenue that the homes see in their Medicaid payments more than offsets the cost of the fees paid to the state.
Under Iowa law, the care facilities are supposed to use most of the increased revenue to boost the pay of their front-line caregivers — which is why the fees are labeled “Quality Assurance Assessment fees.” It’s a circular, but legal, method of increasing the revenue collected by nursing homes and has been approved by the federal government in Iowa and other states.
In recent years, however, it has become clear that not all Iowa nursing homes are actually paying the fees they owe to the state. Last month, the Iowa Capital Dispatch asked the Iowa Department of Health and Human Services for a list of the Iowa care facilities that are behind in their payments, along with the amount owed by each facility.
The department has yet to respond to that request, adding that the information needs to be reviewed by department “leadership” before being disclosed.
One company owed taxpayers $3.9 million in fees
Tabor Manor isn’t the first Iowa nursing home to file for bankruptcy after neglecting to pay the QAA fees to the state.
In 2021, the Iowa-based QHC Facilities nursing home chain filed for bankruptcy and informed the court that it owed taxpayers more than $3.9 million due to unpaid QAA fees.
Initially, the state attempted to negotiate with the company to have that debt treated as a higher priority so that once the chain was sold and the company’s assets were liquidated, Iowa taxpayers would be among the creditors first in line when the company’s debts are settled.
Eventually, though, the attorney general’s office abandoned that effort. At the time, the attorney general’s office said that doing so was “in the best interest of the health and safety of residents” since abandoning collection efforts might lessen the chances of QHC homes being forced to close.
At the time of its bankruptcy, QHC Facilities also owed the state and federal government at least $2.2 million for unpaid fines and advance payments collected for resident care. The company had been cited for more than 180 regulatory violations during the previous two years.
Not all homes comply with pay-increase requirement
In 2022, DHHS reported to state lawmakers that of the 379 Iowa nursing homes that were required to spend their increased Medicaid revenue on pay increases for certified nurse aides, 68 of them – or 18% of the total — failed to do so.
An additional 37 homes – or 10% of the total – failed to meet a different standard that required them to spend 60% of their excess revenue on compensation for all staff.
Similar rates of compliance were reported in 2020.
When the Capital Dispatch asked DHHS whether it was taking steps to enforce the law that requires payment of the QAA fees, a department official said that while the Iowa Legislature had required the department to collect data on the QAA program, it did not provide the department with any enforcement authority.
Despite the lack of compliance by some care facilities, DHHS proposed a major increase in state spending on the QAA program last year. In a subsequent phone call with Iowa nursing home representatives, the industry’s main lobbying organization, the Iowa Health Care Association, boasted of the increased revenue nursing homes would realize, calling it “a pretty big chunk of money.”
According to a budget analysis by House Republicans , $111.2 million was appropriated from the Quality Assurance Assessment Trust Fund for Fiscal Year 2024, which ended June 30. “These funds do not revert back to the general fund,” the GOP advised state legislators, noting that it would result in a $68 million increase in revenue for facility owners.
State, Tabor Manor fail to agree on payment plan
In recent bankruptcy-court filings, Tabor Manor Care Center has said the biggest financial hurdle it now faces is the unpaid QAA fees owed to the state.
“In order to continue our important work, the company deferred payment of QAA fee obligations during the COVID-19 pandemic and the post-pandemic recovery period,” the home’s owner and administrator, Mitchell Worcester, told the court.
He said that before filing for bankruptcy, his company tried to negotiate a plan to pay off the $1.1 million debt over a “period of time which matched the company’s ability to pay.” He said the state was “only able to offer a payment plan of relatively short duration, including escalating payments, which the company will not be able to perform to.”
Worcester told the court that one of “the principal purposes” of the company’s bankruptcy filing is to address the $1.1 million debt in a manner that will enable the home to remain open.
The company’s goal, he said, is to renew negotiations with the state on a payment plan.
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