Indiana county hospitals keep nursing home spending secret. This bill would change that.

For years, public hospitals in Indiana have relied on a matrix of state laws to hide everything from how much their executives are paid to how much federal money they spend on their nursing homes.

A new bill filed at the Indiana Statehouse could change that.

Senate Bill 405, introduced by Sen. Fady Qaddoura, D-Indianapolis, would require city and county hospitals to file a report with the state each year showing how they used revenue from their nursing homes. It would also repeal a law that currently allows public hospitals to keep employee salaries — including executive compensation — a secret.

The bill's transparency requirements would shed light for the first time on exactly how much federal money county hospitals divert from their nursing homes — and to what extent hospital leaders have benefited personally.

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Those issues were central to an IndyStar investigation that found at least $1 billion in supplemental Medicaid money generated by Indiana nursing homes had been used instead for other purposes, such as county hospital construction projects.Staffing at the nursing homes, meanwhile, remained poor.

"To have the General Assembly silent on these issues is mind baffling to me," Qaddoura said. "I don't understand."

The bill faces an uphill climb. Qaddoura is a first-term lawmaker whose party controls just 11 of the Senate's 50 seats, and he is taking on an industry that is among the top five biggest spenders on lobbying at the Statehouse.

The money is part of a Medicaid program that provides extra payments to nursing homes owned by local government agencies, including county hospitals. About 20 county hospitals across the state have acquired more than 90% of Indiana's roughly 530 nursing homes, at least on paper, to access the extra Medicaid funds.

The money — more than $825 million last year — is intended to improve care for nursing home residents. But IndyStar found that county hospitals exploit loose state and federal rules that allowed them to divert much of the money away from the nursing homes to pad the bottom lines of their hospitals instead.

The true amount of money that has failed to reach nursing home residents as a result is not known because many county hospitals won't disclose the information.

IndyStar has been seeking the information for more than two years, but recently suffered a setback when Indiana Public Access Counselor Luke Britt issued an opinion finding that such spending records are confidential trade secrets that do not have to be disclosed.

The diverted funds have drawn sharp criticism because Indiana's nursing homes are some of the most poorly staffed in America. Even before the pandemic, Indiana ranked 48th in the nation for total nursing staff when adjusted for the needs of residents.

Under SB 405, the hospitals would have to annually report their nursing home revenue and how they used that revenue. They would also have to disclose employee salaries. Right now, public hospitals are the only government agencies in Indiana that are exempt from publicly disclosing that information.

That exemption, signed into law by then-Gov. Mike Pence in 2016, makes it difficult to determine to what extent the compensation of county hospital CEOs has grown as they gobbled up nursing homes across the state. IndyStar's investigation found that one county hospital leader brought in $8 million in a single year.

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Open government advocates have decried the exemption, noting that even the state's private nonprofit hospital systems, such as IU Health and Community Health Network, must disclose the compensation of their CEOs in annual tax filings.

The bill also seeks to address longstanding concerns about the quality of care in Indiana's nursing homes and their vulnerability to fraud. It would require the Indiana Department of Health to establish new quality metrics for nursing homes and it would prohibit retaliation against whistleblowers who expose wrongdoing at health facilities.

Qaddoura said the legislation was motivated by IndyStar's investigation and pleas from his constituents, including some who lost loved ones in nursing homes during the pandemic.

In all, more than 7,000 long-term care residents have died from COVID-19 in Indiana. That represents about a third of the state's total coronavirus death toll.

Qaddoura said it's unacceptable that Indiana's nursing homes are among the best funded in America, but have some of the lowest staffing levels and highest COVID-19 fatality rates.

His concerns have been heightened by allegations of rampant fraud at county-owned nursing homes, including the conviction of several nursing home executives in recent years, he said.

"If someone is doing business transparently and they are following the books," he said, "then why the need for that much secrecy?"

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The bill's prospects remain unclear. The state's powerful nursing home industry traditionally has opposed legislation that includes new quality standards such as staffing ratios. And county hospitals have argued that the secrecy provisions in state law are essential to help them compete against private hospitals and other nursing home owners.

The man who will decide the legislation's fate is Sen. Ed Charbonneau, a Valparaiso Republican who chairs the Senate Health & Provider Services Committee. He said Wednesday he is still deciding whether he will hold a hearing on the bill. The deadline to do so is Thursday.

He seemed to express interest in the topic during an unrelated hearing on Wednesday. Hancock Regional Hospital CEO Steve Long was testifying on a different bill when Charbonneau asked about how much the hospital spends on its 28 nursing homes. Their exchange demonstrates just how difficult it is — even for a state senator — to get answers to basic financial questions.

"Does all of the money go to the nursing homes?" Charbonneau asked.

"The vast majority of it goes to the nursing homes," Long said.

"Is that public information?" Charbonneau asked.

"The money that is drawn down is public information, sir," Long said.

Charbonneau was skeptical. "The amount of money that you give to the nursing homes?" he asked.

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Long then explained that the amount spent on the nursing homes is defined within the hospital's contracts with various private nursing home management companies.

"So it's not public?" Charbonneau asked.

"Correct," Long said. "Our agreements are not public."

IndyStar asked Charbonneau after the hearing if he was satisfied with a public hospital keeping secret how it spends millions of dollars in federal tax money.

"I'd rather not speak about that right now publicly," he said. "It's a question a lot of folks have, and we'll see where we go."

Contact IndyStar reporter Tony Cook at 317-444-6081 or tony.cook@indystar.com. Follow him on Twitter: @IndyStarTony.

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