Legislative Analyst's Office Analysis of the 2001-02 Budget Bill

Department of Veterans Affairs and Veterans' Homes of California (8955-8966)

The Department of Veterans Affairs (DVA) provides services to California veterans and their dependents, and to eligible members of the California National Guard. The principal activities of the DVA include: (1) providing home and farm loans to qualifying veterans using the proceeds from the sale of general obligation and revenue bonds; (2) assisting eligible veterans and their dependents to obtain federal and state benefits by providing claims representation, subventions to county veterans service offices, and direct educational assistance to qualifying dependents; and (3) operating veterans' homes in Yountville, Barstow, and Chula Vista, with several levels of medical care, rehabilitation services, and residential services.

The budget proposes total expenditures of $338 million for DVA in 2001-02. This is $739,000 less than estimated current-year expenditures. Total budget-year expenditures of $67 million from the General Fund are proposed, which is $1.3 million, or 2 percent, less than the estimated current-year level.

Serious Problems in Management and Operation Of the Veterans' Home in Barstow

We recommend that the Legislature not approve funding for the Barstow Veterans' Home (Item 8965-001-0001), until such time as the department reports to the Legislature on the progress and timetable for obtaining recertification of the facility.

The Veterans' Home in Barstow is a 400 bed facility that provides multiple levels of care, including a 180 bed skilled nursing facility (SNF), a 56 bed residential care facility for the elderly, and a 164 bed independent living domiciliary. The Governor's budget proposes $20.7 million ($12.2 million General Fund, $3.5 million Federal Trust Funds, and $5 million reimbursements) for the support and operation of the home. The population for all levels of care as of December 31, 2000 was 242 residents. This is 66 fewer residents, or a 21 percent decline, from last year's census. In view of the problems at the Barstow home (discussed below), it is not clear that the home will receive the budgeted level of federal funds and reimbursements.

Serious Problems Cited at Barstow. The Veterans' Home in Barstow has had a number of serious problems since it opened in February 1996. These problems include poor management, inadequate staff training, and difficulty hiring health care workers. This situation lead to a series of events that culminated in inspections of the home by both the California Department of Health Services (DHS) and the US Department of Veterans Affairs (USDVA). Based on these inspections, the home, in June 2000, lost its Medi-Cal and Medicare certifications along with its federal per-diem payments (received for each resident). The department has estimated that due to these actions and the lower number of residents, the home will lose $5.9 million of federal funds and other reimbursement in the current year. Figure 1 (see next page) shows a chronology of major events that lead to the current situation at the Barstow home.

In order to regain certification, DVA entered into a stipulated agreement with DHS that called for DHS to appoint a contractor to serve as the temporary manager for the 180 bed SNF at Barstow. Based on this agreement, DHS appointed Country Villa Health Services to fill this role and, on January 16, 2001, DVA signed a contract with this company. The term of the contract is from January 15, 2001 through June 30, 2001, at a cost of $530,500. As temporary manager, the contractor is charged with bringing the SNF into substantial compliance with federal requirements by June 30, 2001. Some of the major services to be provided by the contractor are:

• Manage and operate the SNF.
• Conduct an in-depth assessment of the status of the SNF operation (to be completed by January 31, 2001).
• Provide a proposed plan of corrective action to permit the SNF to obtain certification by June 30, 2001.
• Consult with the department in selecting a permanent SNF administrator for the home.
• Prepare and conduct training courses and institute corrective action by March 30, 2001.

As called for in the contract, Country Villa Health Services is to have the Barstow facility recertified, staffed with well-trained personnel, and capable of operating in substantial compliance on its own by June 30, 2001. The contract allows for the extension of time and an increase in costs. The administration is seeking funding to pay for the Country Villa Health Services contract (approximately $530,000) and to replace the loss of federal and other reimbursements in the current year (approximately $6 million) through separate legislation (SB 45, Johannessen).

In view of the serious problems in the management and operation of the Barstow home, we recommend the Legislature not approve the home's budget until the department reports to the Legislature detailing the progress made in correcting the deficiencies identified by DHS, USDVA, and the contractor, and identifies the remaining steps to be taken and the timetable to obtain recertification and receive federal funds and reimbursements.