Md. begins paying $16 million to settle nursing home lawsuit

By Darryl Fears
Washington Post Staff Writer
Thursday, August 19, 2010

Maryland started repaying $16 million to nursing homes and nursing home residents Wednesday as part of what attorneys called the second-largest class-action settlement in the state's history.

The residents claimed in the lawsuit, filed in 2005, that the state Department of Health and Mental Hygiene violated federal and state laws when it wrongly determined that they had the ability to pay their monthly nursing home costs. The department didn't take into account the debt they accrued at the facilities while awaiting approval for Medicaid coverage.

According to the federal Centers for Medicare and Medicaid Services, states are required to factor in debt when determining the income of nursing home residents. States are also obligated to pay residents' monthly fees once they are approved for Medicaid; then residents can use their own income to pay off their debt.

Attorneys for the plaintiffs said an audit conducted with the help of nursing homes determined that the state owed $64 million to nursing homes from 2002 to the present. State officials rebutted the audit's findings and denied any wrongdoing in the lawsuit, filed by Eunice Smith and two other nursing home residents in August 2005, but agreed to a settlement in February before Judge W. Michel Pierson in Baltimore City Circuit Court.

"This is something that has been dragging on for five years," said John Folkemer, the state's deputy secretary for health-care financing. "They said it was $64 million. As we asked for details, we found it was significantly less than that. Neither side knew how much was the right amount. We collectively decided to agree on the figure of $16 million."

The settlement was made final in May. The payments will be split between Maryland and the federal government, which matches what states pay in the Medicaid program, over three years.

"They're going to pay $16 million while admitting no wrongdoing, the second-largest amount the state has paid to settle a claim against the state," said Cyril Smith, an attorney for the plaintiffs. "We felt we got all the relief we would have gotten had we gone to trial."

More than 12,000 current and former nursing home residents were in the class of plaintiffs, and more than 300 homes were owed. Nursing home administrators said they could not collect debts from residents because they were paying monthly rent on a limited income.

Smith said a similar suit brought against the District by a much smaller class of plaintiffs resulted in an agreement by the city to make program changes but pay no monetary award.

In the Maryland suit, lawyers for both sides agreed that the case would have taken years to resolve without a deal. The settlement notice said an agreement was reached "to avoid the continued uncertainty, delay and expense of further litigation."

Maryland agreed to observe the letter of the law, Folkemer said.

"We think that things are pretty well resolved," he said. "When someone is in a nursing home . . . not only do you have to recognize what their obligations are, you have to recognize some of the debts they owe."

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