‘This is scandalous:’ Auditor asked to examine $10.7 million owed to taxpayers

The stated mission of the Iowa Auditor of State's Office is to help ensure government officials use taxpayer dollars for the intended purposes to benefit the public. (Main photo from Getty Images; seal courtesy the State of Iowa)

An advocate for seniors is calling on the state auditor’s office to investigate the state’s failure to collect $10.7 million in fees owed by corporate nursing home owners.

The auditor’s office says it has reported a state agency’s failure to collect the fees but has no enforcement authority.

The Iowa Capital Dispatch reported last week that 49 Iowa nursing homes owe Iowa taxpayers more than $10.7 million in unpaid fees that are past due and which the state has so far failed to collect.

According to documents obtained through the state’s Open Records Law, one for-profit company based in West Des Moines operates 18 care facilities that collectively owe the state $3.6 million in unpaid fees. The company’s top two executives, meanwhile, have made $293,000 in political donations to Statehouse leaders, the governor and industry lobbyists.

The fees the state imposes on nursing homes, called Quality Assurance Assessment fees, are a mechanism that has been used since 2009 to artificially inflate the facilities’ cost of doing business.

That increased expense enables the facilities to draw down more money in Medicaid reimbursement for resident care. Often, the increased Medicaid payments more than offset the cost of the fees paid to the state, resulting in a net gain for the homes.

By law, the care facilities are supposed to use that additional money to increase the compensation of front-line caregivers — which is why the fees are called 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.

However, not all Iowa homes are paying the fees and of those that do, up to 18% of them have failed to meet all of the legal requirements for spending their additional Medicaid revenue on pay increases for front-line caregivers.

‘Taxpayers are getting taken to the cleaners’

Two Iowa nursing home companies that have filed for bankruptcy in recent years did so while owing the state a combined total of $5 million in unpaid QAA fees. Some of those unpaid fees date back to at least 2019, according to court records.

John Hale, a consultant and advocate for Iowa seniors, says it appears to him that “taxpayers are getting taken to the cleaners” by nursing home companies.

“This is scandalous,” Hale said. “Nursing homes are quick to take taxpayer money, but too many are reluctant to pay the taxpayer back when money is owed.”

Dean Lerner, who was the director the state agency that inspected nursing homes during the Democratic administration of Gov. Chet Culver, said the industry is cheating taxpayers “and no one seems to care, most of all the Republicans who are beholden to industry instead of residents.”

Hale said an investigation by the Iowa Auditor of State is warranted, in part to make sure nursing facilities that claim to be increasing staff pay are doing so.

“Has anyone done any audits of all this self-reported data from nursing homes?” Hale asked. “When front-line workers in nursing homes are currently being paid wages that aren’t enough to live on, how can we believe the industry when they say they’ve been using this extra money to increase wages for the past 10 years? This just doesn’t hold water.”

In a written statement, Auditor of State Rob Sand said his office has publicly reported DHHS’ failure “to collect these fees as required by law. However, the auditor’s office isn’t an enforcement agency. We have no legal authority to force DHHS to collect the fees or impose penalties on the facilities that don’t pay them.”

Di Findley of Iowa CareGivers, an association of front-line health care workers, said one problem with the QAA program is that the enabling legislation allows homes to spend their additional revenue on not just wage increases, but on staff “compensation.”

Some homes, she said, have defined “compensation” in such a way that the money has been used to pay for staff training, employee education, and a fitness room for workers – expenses the owners would have otherwise had to absorb.

She noted that the Iowa Health Care Association, which lobbies for the industry, told member nursing homes they could use their extra Medicaid revenue to pay the fees associated with workers’ enrollment in an IHCA-affiliated association of caregivers.

‘We’re not talking chump change’

The Iowa Department of Health and Human Services tracks the payment of fees and collects self-reported data on staff wages, but says the 2009 legislation creating the QAA fee program didn’t give the department any enforcement authority.

Hale said he questions why DHHS and state lawmakers haven’t addressed that issue in the past 15 years.

“Have elected leaders in the majority party been asleep at the wheel?” he asked. “We’re not talking chump change here. We’re talking about millions of uncollected dollars.”

He said a state audit should examine the 2009 legislation, the annual compliance reports prepared by DHHS, the accuracy of the industry’s self-reported data and the state’s collection practices.

According to DHHS, 41 of the 49 homes that are behind in their payments are currently on some form of “repayment plan.”

Maureen Barton of DHHS has said the department is “working diligently to ensure providers are adhering to repayment plans” on the fees that are imposed, and said DHHS has “made significant progress in bringing down the overall balance.”

Barton said that when a facility falls behind in payments, the state sends “a demand notice” asking the facility to pay the entire amount that’s due. If that doesn’t happen, she said, DHHS can reduce the amount of Medicaid money flowing to the homes in an effort to offset the debt.

Political donors’ company owes $3.6 million

The company that appears to owe taxpayers the most is Accura Healthcare of West Des Moines. Eighteen of the for-profit company’s Iowa care facilities are currently on payment plans with the state, and they now owe a combined $3,644,432.97, according to DHHS.

Campaign finance records show that since 2015, Accura Healthcare’s CEO, Ted LeNeave, has personally donated more than $239,000 to GOP campaigns in Iowa and to the political action committee of the industry’s main lobbying organization.

That total includes $54,500 LeNeave donated directly to Gov. Kim Reynolds’ campaigns, plus $76,000 LeNeave donated to Iowa Senate Majority Leader Jack Whitver of Grimes.

Since 2021, the president of Accura Healthcare, Lisa Toti, has made $36,000 in political donations in Iowa, including $16,000 contributed to Reynolds’ campaign committees.

LeNeave and Toti have not responded to calls from the Iowa Capital Dispatch, but a company spokesman issued a one-sentence joint statement with Brent Willett of the Iowa Health Care Association that said Accura Healthcare “is currently in good standing” with the QAA program.