The Service Employees International Union has sent a letter to 100 state and local regulators across the country asking them to look closely at any licensing and certification applications from Res-Care, a for-profit company that serves disabled people.
The letter arises out of complaints from Indiana Medicaid officials that Res-Care padded its profits for the benefit of its executives and stockholders.
The SEIU's letter is part of its national campaign to call public attention to the nursing home industry's low wages and poor working conditions. Although the SEIU doesn't currently represent any Res-Care employees, the union expects to be dealing with the company in the future as Res-Care buys facilities staffed by SEIU members. "The expansion of Res-Care is not going to be good for recipients of care, and it's not going to be good for our members," said Steve Askin, an SEIU healthcare analyst.
Res-Care, based in Louisville, Ky., provides group homes and supportive living arrangements for people with mental retardation and developmental disabilities in 15 states. Almost all its revenues come through government reimbursements.
Julie Harding, director of communications for Res-Care, said: "We're perplexed by the union's press release. They don't represent any of the company's employees at this time. Some of the statements they've made are inaccurate."
Res-Care is among the most efficient providers in the state and is being rewarded for that in the reimbursement formula, she said. By contrast, homes run by the state cost twice as much per patient as Res-Care homes, she said.
"We are among a group of providers who have a dispute with (a state official) about the Medi-caid reimbursement rate," she added.
Indiana is trying to alter its reimbursement formulas to cut its expenses. According to a statement from Gov. Evan Bayh's office, Res-Care has tried to raise public opposition to those changes.
James Verdier, Indiana's assistant secretary for Medicaid Policy and Planning, accused a Res-Care executive of giving "substantially misleading testimony" to a state commission. Verdier said that contrary to the company's claims, "Res-Care's profits are unusually high," and the company is being reimbursed in excess of 109% of its costs, while the state average is 103.5%.
What probably caught the SEIU's eye in Verdier's report was the Res-Care executive's claim that the company could only pay $4.50 to $6 an hour to its starting employees because of reimbursement limitations.
Verdier responded: "Because Res-Care makes such extraordinary profits on their Indiana operations, they could clearly afford to pay higher hourly wages to their entry-level employees if they chose to do so."
A copy of Verdier's report is included in the letter by SEIU President Richard W. Cordtz to state officials around the nation.
The SEIU points out that Res-Care executives hold about one-third of its stock. One member of Res-Care's board of directors is W. Bruce Lunsford, chief executive officer of Louisville, Ky.-based Vencor, which operates long-term-care hospitals. The SEIU has been locking horns with Lunsford for years in an effort to raise wages and improve working conditions at Vencor hospitals.
The SEIU's Askin said the union's agenda is "to get the states to look very closely when Res-Care comes in trying to implement its expansion plan. The state of Indiana has a problem, which could become your problem."
The union says its problem is that when Res-Care buys out not-for-profit group homes with SEIU representation, it will have to bargain with a company that it regards as hostile to its interests.