Trends in Long-Term Care - U.S. Senate Special Committee on Aging

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came to us, and they reported they had never seen such a tremendous
number of transfers <strong>in</strong> any one parcel of real property.
I might also add that we could have chosen any one of a dozen
nurs<strong>in</strong>g homes that we have, that have similar or even more complicated
flow; however, this one was chosen for the simple reason that it clearly
shows, the State department of health's action clearly shows that this
rent is wrong.
Senator Moss. Now, <strong>in</strong> 1966, you have the green ownership that goes
right on, and then that blue branches off above.
Does that mean the renter is operat<strong>in</strong>g it as a nurs<strong>in</strong>g home, and the
green is simply the ownership?
Mr. MOAN. That is right. They own the physical property, but because
they have entered <strong>in</strong>to this lease, and they dom<strong>in</strong>ate the nurs<strong>in</strong>g
home, because their costs, is a fixed cost, and it is a major fixed cost, and
the $100,000 here is a lot of money to put on this one small build<strong>in</strong>g.
I have pictures of the build<strong>in</strong>g, which I would like to admit <strong>in</strong>to
evidence, and they show a build<strong>in</strong>g, a three-story build<strong>in</strong>g.*
Senator Moss. This build<strong>in</strong>g there?
Mr. MOAN. That is right. That is the build<strong>in</strong>g, and the other picture
shows the back of it, and this is the <strong>in</strong>stitution that we are talk<strong>in</strong>g
about, that underwent all of those transfers, and was mortgaged at
one time for $1.3 million.
Senator Moss. Did you check its assessed valuation?
Mr. MOAN. The assessed value is less than $212,000.
Senator Moss. These will be admitted <strong>in</strong>to the files.
Did you f<strong>in</strong>d violation of law <strong>in</strong> all of this transfer, anyth<strong>in</strong>g that
you thought was violation of law?
Mr. MOAN. No, we did not f<strong>in</strong>d actual violations of law. This is legal,
all of these transfers are legal. It is a perfectly legal operation. There
is noth<strong>in</strong>g unlawful or crim<strong>in</strong>al about it.
The problem comes <strong>in</strong> that the exist<strong>in</strong>g medicaid reimbursement formula
permits the reimbursement based upon a history of all of those
transfers, and if the cost of that build<strong>in</strong>g, and the value of that build<strong>in</strong>g
was-bore no relationship to its real value, its assessed value of
$212,000, after the $250,000 worth of renovations, so that here we have
a build<strong>in</strong>g that we know is worth no more than $300,000 <strong>in</strong> 1957, and a
build<strong>in</strong>g that underwent $250,000 worth of renovations, that figure is
recorded on the State department of health records, the HE-2, and
the total of those is much less, it is even less than half of the amount
of mortgages that were entered <strong>in</strong>to on that build<strong>in</strong>g.
Senator Moss. What was the end effect, if you have it, what was the
end effect of the cost figures that comes out at the end of that formula,
by reason of the real estate?
Mr. MOAN. Well, aga<strong>in</strong>, we don't know exactly how much the State
department of health will eventually reduce the rent <strong>in</strong> the future.
We have been told, or I was told that the owners said they would no
longer be able to operate the <strong>in</strong>stitution, would have to go out of bus<strong>in</strong>ess,
because the planned reduction of bus<strong>in</strong>ess would be too great, and
would force them <strong>in</strong>to bankruptcy, so what is probably a fairer rent
for the build<strong>in</strong>g was allowed, the <strong>in</strong>stitution would be no longer under
the medicaid system, and would no longer bear any relevance to how
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