Performance audit, Arizona Pioneers' Home and Hospital for Disabled Miners

              State of Arizona
Office
of the
Auditor General
PERFORMANCE AUDIT
Report to the Arizona Legislature
By Douglas R. Norton
Auditor General
ARIZONA
PIONEERS' HOME
AND
HOPSITAL FOR
DISABLED MINERS
April 1997
Report No. 97-5
2910 NORTH 44th STREET • SUITE 410 • PHOENIX, ARIZONA 85018 • (602) 553-0333 • FAX (602) 553-0051
DOUGLAS R. NORTON, CPA
AUDITOR GENERAL
DEBRA K. DAVENPORT, CPA
DEPUTY AUDITOR GENERAL
STATE OF ARIZONA
OFFICE OF THE
AUDITOR GENERAL
April 14, 1997
Members of the Arizona Legislature
The Honorable Fife Symington, Governor
Ms. Jeanine Dike, Superintendent
Arizona Pioneers’ Home
Transmitted herewith is a report of the Auditor General, A Performance Audit of the Arizona
Pioneers’ Home and Hospital for Disabled Miners. This report is in response to a May 29, 1995,
resolution of the Joint Legislative Audit Committee. The audit was conducted as part of the
Sunset Review set forth in A.R.S. ''41-2951 through 41-2957.
The report addresses the need for the State to make critical decisions regarding the Pioneers’
Home. First, the Home has fire and building code violations, as well as structural and system
problems, which will require an estimated $7.9 million to correct. Second, a significant increase
in revenues will be necessary to continue existing operations since some of the funds used to
support the Home are being depleted. Third, the Home’s operating costs will continue to rise
due to the increasing number of residents requiring skilled care. We recommend the Legislature
establish a special study committee to make recommendations regarding the Home’s future.
Options include refurbishing and continuing the Home, reducing the scope of the Home’s
operations, and phasing out and closing the Home.
The audit also found that the State continues to inappropriately expend monies in the Miners’
Hospital Endowment Fund to support the Home. In addition, the Home has not complied with
statutory requirements in determining resident payments for care. Finally, the Home could
reduce the costs of providing medical care to residents if residents join a Medicare Health
Maintenance Organization.
My staff and I will be pleased to discuss or clarify items in the report.
This report will be released to the public on April 15, 1997.
Sincerely,
Douglas R. Norton
Auditor General
Enclosure
i
SUMMARY
The Office of the Auditor General has conducted a performance audit and Sunset review
of the Arizona Pioneers= Home and Hospital for Disabled Miners, pursuant to a May 29,
1995, resolution of the Joint Legislative Audit Committee. The audit was conducted as part
of the Sunset review set forth in Arizona Revised Statutes (A.R.S.) ''41-2951 through 41-
2957.
The Arizona Pioneers= Home (the Home), a state-funded, long-term care facility, was
established by statute in 1909 and opened in Prescott in 1911. The Hospital for Disabled
Miners was authorized by statute in 1929, as required by the Arizona Enabling Act;
however, a hospital was never built. Instead, miners who meet statutory admission
requirements for the Hospital for Disabled Miners are admitted to the Arizona Pioneers=
Home. As of October 1, 1996, the Home had 155 residents, 13 of whom were miners. The
Home is funded by General Fund appropriations, state trust land funds, and donations.
Residents, except for disabled miners, are also required to contribute toward the cost of
their care to help offset General Fund appropriations.
Critical Decisions Needed to
Determine the Home=s Future
(See pages 9 through 19)
Although the Arizona Pioneers= Home provides quality care for its residents, the State
needs to make critical decisions regarding the Home. Three factors will soon make it
difficult for the Home to continue its current activities:
n First, the Home is in disrepair, and an estimated $7.9 million will be necessary to
correct the problems. For example, a fire marshal inspection found that in the event of
a fire, problems with the Home=s stairwells and exit ramps would make it difficult to
safely and quickly evacuate residents, and the Home=s sprinkler system may not
respond quickly enough to prevent fatalities. In addition, the Home does not meet
numerous current building code requirements. Further, the Home has a number of
problems with its external structure, as well as plumbing, heating, electrical, and
interior problems. Finally, if repairs are made to the facility, asbestos and lead paint
removal are required to comply with federal law.
n Second, a significant increase in revenues will be needed to continue existing
operations. Monies from the State Charitable Earnings Fund and the Miner=s Hospital
Endowment Fund expendable account are being depleted. In fact, the State Charitable
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Earnings Fund=s balance has already been largely depleted. Further, use of the Miners=
Hospital Endowment Fund to support the Home violates the Arizona Enabling Act and
should be discontinued immediately. The State Charitable Earnings Fund and the
Miners= Hospital Endowment Fund supported more than $2.7 million of the Home=s
net expenditures in fiscal year 1996. Given these conditions, the Home will need
additional revenues to continue its existing levels of service.
n Third, the Home=s operating costs will continue to rise due to the increasing number
of residents at the Home requiring skilled care. Specifically, in 1986, an average of 18
residents per month needed skilled care. As of October 1, 1996, 45 residents received
skilled care. According to the Home=s estimates for fiscal year 1996, providing skilled
care cost an estimated $3,589 per resident per month, compared to $1,442 per month to
care for a resident who needed only minimal assistance.
Consequently, the Legislature should establish a special committee of experts and
interested parties to consider options and make a recommendation regarding the Home=s
future. Options include:
n Refurbishing and continuing the Pioneers= HomeCThe Home could be refurbished
at an estimated cost of $7.9 million and continue to provide services to approximately
160 residents. In addition to remodeling or reconstruction costs, additional revenues
will be needed to support increased operating expenses as the Home depletes current
funding sources and the number of residents needing skilled care continues to increase.
n Reducing the scope of operationsCThe Home could reduce the scope of its operations
by limiting the care it provides to personal care only. Once a resident needed a higher
level of care, he or she would be discharged to an appropriate nursing facility. Further,
the Home could limit the number of personal care residents and staffing to correspond
to available funding. Although the State would still need to pay for some necessary
repairs to the facility, reducing the number of residents at the Home might decrease the
amount of necessary repairs to the facility, thereby reducing repair costs.
n Phasing out and closing the HomeCThe Pioneers= Home could be closed immediately
or phased out. A phase-out would provide sufficient transition time for remaining
residents to find new places to live and for staff to find new employment.
iii
State Continues to Expend Monies
in Miners= Hospital Endowment Fund
in Violation of Enabling Act
(See pages 20 through 24)
The State continues to expend Miners= Hospital Endowment Fund (Fund) monies in
violation of the Arizona Enabling Act. The Fund was established to construct and operate
a hospital for disabled miners, but Arizona has never established such a facility. Instead,
the State has been using the Fund to care for a limited number of disabled miners and
other residents of the Arizona Pioneers= Home. A 1986 audit of the Arizona Pioneers=
Home, a 1987 Attorney General opinion, and a subsequent informal Attorney General
opinion determined that expending monies in the Fund to support the Pioneers= Home is
inappropriate, but these expenditures continue. Since these expenditures to support the
Home are in violation of the Enabling Act, the State could be found liable for the improper
use of the Miners= Hospital Endowment Fund and could be required to repay the Fund
with interest, as occurred in New Mexico. Consequently, the State should discontinue using
the Miners= Hospital Endowment Fund to support the Pioneers= Home. To resolve
problems with future uses of the Fund, the State should petition Congress for a change in
the Enabling Act.
The Home Could Recover Additional
Costs by Complying with Statutes
and Improving Practices
(See pages 26 through 31)
The Home has not complied with the statutory requirement that residents= assets be
included in determining payments for care. As a result, a review of 116 residents= financial
files revealed that these residents would have paid approximately $1 million more for their
care if the Home had included the value of their assets in 1996 payment for care
calculations. One resident, for example, owned assets worth approximately $250,000.
Because the Home did not calculate this resident=s payment for care in accordance with
statute, Arizona taxpayers subsidized approximately half of this resident=s monthly fees
for care. In another nursing home, this resident would not have been eligible to receive a
financial subsidy, but instead would have used some personal assets to pay the full cost
of care.
The Home also does not verify applicant- and resident-reported financial information as
required by statute. In addition, several of the Home=s payment for care calculations are
inaccurate and result in inconsistent treatment of some residents. To ensure residents are
treated equitably in the future, the Home needs to promulgate and adhere to administra-tive
rules for determining resident payments for care.
iv
The Home Could Reduce Medical Expenses
if Residents Join a Medicare HMO
(See pages 32 through 36)
The Home could reduce the costs of providing medical care to its residents by approxi-mately
$190,000 annually if its residents join a Medicare Health Maintenance Organization
(HMO). Unlike other nursing homes in Arizona, the Pioneers= Home is statutorily required
to provide its residents with medical care. The Home attempts to recover medical expenses
from Medicare and supplemental insurance companies, but its billing process is inefficient
and ineffective. The Home could reduce medical costs and eliminate the need to bill
medical insurers if residents were members of a Medicare HMO. The Home needs
approval from the State Procurement Office and a statutory provision to enable it to select
the most cost-effective means to provide medical care to its residents and realize the
greatest savings.
v
Table of Contents
Page
Introduction and Background........................................................... 1
Finding I: Critical Decisions Needed to
Determine the Home=s Future ...................................................... 8
Millions of Dollars Needed to Correct
Building Hazards .................................................................................................. 8
Future Sources of
Funding Uncertain................................................................................................ 12
Increasing Number of
Residents Needing Skilled
Care Is Costly......................................................................................................... 15
Options Need to
Be Considered........................................................................................................ 15
Recommendations................................................................................................. 18
Finding II: State Continues to Expend
Monies in Miners= Hospital Endowment
Fund in Violation of Enabling Act ................................................ 19
Use of the Miners=
Hospital Endowment Fund
Remains Inappropriate......................................................................................... 19
State Could Be Liable
for Improper Use of Miners=
Hospital Endowment Fund.................................................................................. 21
The Legislature Should Petition
Congress to Change
the Enabling Act.................................................................................................... 22
Recommendations................................................................................................. 23
vi
Table of Contents (cont=d)
Page
Finding III: The Home Could Recover
Additional Costs by Complying with
Statutes and Improving Practices................................................ 25
The Home Should Determine
Resident Payment for Care
in Accordance with Statute ................................................................................... 25
Many Problems Exist
with the Home=s Payment
for Care Determinations ........................................................................................ 27
The Home Could Further
Increase Revenues to
the General Fund.................................................................................................... 30
Recommendations.................................................................................................. 30
Finding IV: The Home Could Reduce
Medical Expenses if Residents
Join a Medicare HMO.................................................................... 31
Current Medical
Provisions Are Costly ............................................................................................ 31
Savings of $190,000 Possible
with Medicare HMO.............................................................................................. 32
Approval and Statutory Provision
Are Necessary......................................................................................................... 34
Recommendations.................................................................................................. 35
Sunset Factors ................................................................................... 37
Agency Response
vii
Table of Contents (concl=d)
Page
Figure
Figure 1 Arizona Pioneers= Home
Expenditures by Fund Source
Years Ended or Ending
June 30, 1986, 1996, and 1998
(Unaudited) .............................................................................. 14
Tables
Table 1 Arizona Pioneers= Home
Statement of Expenditures
Years Ended or Ending June 30, 1995 through 1997
(Unaudited) ............................................................................... 3
Table 2 Arizona Pioneers= Home
Estimated Cost of Repair.......................................................... 9
Table 3 Arizona Pioneers= Home
Monthly Fee for Care, Payments for Care,
State Subsidies, and Assets
for Three Residents
February 1996
(Unaudited) ............................................................................... 27
Table 4 Arizona Pioneers= Home
Comparison of Annual Actual Medical Expenditures
to Estimated HMO Medical Costs
Year Ended June 30, 1996
(Unaudited) ............................................................................... 33
1
INTRODUCTION AND BACKGROUND
The Office of the Auditor General has conducted a performance audit and Sunset review
of the Arizona Pioneers= Home and Hospital for Disabled Miners, pursuant to a May 29,
1995, resolution of the Joint Legislative Audit Committee. The audit was conducted as part
of the Sunset review set forth in Arizona Revised Statutes (A.R.S.) ''41-2951 through 41-
2957.
The Arizona Pioneers= Home (the Home), located in Prescott, is a state-funded, long-term
care facility for the elderly. The Home was established in statute in 1909 and opened in
1911. The Hospital for Disabled Miners was authorized by statute in 1929, as required by
the Arizona Enabling Act; however, a hospital was never built. Rather, the Pioneers= Home
has designated a wing of the building as a miners= hospital and admits miners to the Home
who qualify under the Hospital for Disabled Miners= statutes.
The mission of the Arizona Pioneers= Home is
To provide a home that delivers the maximum physical, emotional and spiritual care to long
term Arizona residents and disabled miners in order to protect dignity and honor personal
directives of each resident in life as well as death. These services shall be provided in a manner
that meets the highest standards for long term health care and state requirements.
Annual reviews by the Department of Health Services have found that the Home provides
residents quality care.
Admission Requirements
Admission requirements for the Arizona Pioneers= Home have changed over the years.
When the Home opened in 1911, individuals who had lived in Arizona for 25 years and
had been active in the State=s development were eligible for admission in accordance with
the Home=s intent to care for Arizona=s early settlers. From 1921 to 1976, applicants to the
Home were required to have lived in Arizona for 35 years. In 1976, the residency
requirement was decreased to 30 years. Finally, in 1979, the requirement that the applicant
must have been active in Arizona=s development was deleted. Currently, A.R.S. '41-923
provides that a person shall be admitted to the Pioneers= Home who:
n Is and has been a citizen or legal resident of the United States for a period of 5 years
prior to application for admission;
n Has been a resident of Arizona for not less than 30 years;
2
n Has reached the age of 65 or more years;
n At the time of admission, is ambulatory; has proper bowel and bladder control; and is
able to bathe, clothe, and feed him- or herself without assistance; and,
n At the time of admission, does not require care in a hospital or in a skilled care or
intermediate care nursing home.
Likewise, A.R.S. '41-942 provides that a person may be admitted to the Hospital for
Disabled Miners (Hospital) who:
n Has been a resident while working in the mining occupation in Arizona;
n Is a citizen or legal resident of the United States;
n Is 60 years old or older; and
n Is financially unable to support him- or herself, or has suffered incapacitating injuries
arising from and in the course of mining.
Additionally, based on available space and funding, the Governor can approve a person
for admission to the Hospital who has not yet reached age 60 but otherwise qualifies for
admission.
As of October 1, 1996, there were 155 residents at the Pioneers= Home, 13 of whom were
miners. Residents are primarily from Yavapai and Maricopa Counties. Yavapai County
residents make up approximately 64 percent of the Home=s population, while Maricopa
County residents make up almost 20 percent of the Home=s population. Residents= average
age is 85.
Organization and Staffing
The Arizona Pioneers= Home operates under the jurisdiction of the Governor=s Office.
However, for a short time in the 1970s, the Director of the Department of Health Services
(DHS) was responsible for the Home. While overseen by DHS, the Home was maintained
as a licensed long-term care facility. When the Governor=s Office resumed oversight of the
Home, the Home was no longer required to be a licensed long-term care facility; however,
DHS must still inspect the Home annually and issue a report citing any deficiencies.
The Arizona Pioneers= Home is managed by a Governor-appointed Superintendent. The
Home was appropriated 107.4 full-time equivalents (FTE) in fiscal year 1996. Additionally,
3
the Home uses seasonal and part-time employees extensively. The Home is organized into
the following eight functional departments: nursing, food service, housekeeping, activities,
resident services, maintenance, accounting, and business office.
Budget
The Arizona Pioneers= Home is funded by the General Fund, two state land trust funds,
and a Donations Fund. Over the past ten years, the General Fund has supported a
decreasing percentage of the Home=s net expenditures.1
The federal government, in the Arizona Enabling Act, set aside trust lands to benefit
various state institutions. Monies derived from the sale of these lands are held in trust
funds for the institutions, and the institutions are allowed to expend the interest earned.
In addition, the institutions are allowed to expend other earnings from the trust lands, such
as lease income. The Pioneers= Home benefits from both the Miners= Hospital Endowment
Fund and the State Charitable, Penal, and Reformatories Institutions Land Trust Fund. The
Miners= Hospital Endowment Fund is a nonappropriated fund, although the Legislature
has appropriated monies from this Fund=s expendable account to the Home. The Pioneers=
Home also receives 50 percent of the interest and other earnings of the State Charitable,
Penal, and Reformatories Institutions Land Trust Fund. The Pioneers= Home=s portion of
those earnings is deposited into the State Charitable Earnings Fund from which the
Pioneers= Home makes expenditures. The State Charitable Earnings Fund is a
nonappropriated fund; however, it moves to appropriated status beginning in fiscal year
1998.
In fiscal year 1986, the General Fund supported approximately 76 percent of the Home=s
net expenditures. In contrast, the General Fund supported approximately 32 percent, or
almost $1.3 million, of the Home=s net expenditures in fiscal year 1996. In that same fiscal
year, the Pioneers= Home expended approximately $1.6 million from the Miners= Hospital
Endowment Fund, almost $1.1 million from the State Charitable Earnings Fund, and
approximately $53,000 from the Donations Fund for operations. Table 1 (see page 4),
presents the Home=s expenditure detail for the years ended June 30, 1995 through 1997.
1 To help offset General Fund appropriations, residents entering the Pioneers= Home since August 11, 1970,
are statutorily required to pay for the cost of their care to the extent they are financially able to do so. These
payments for care are collected by the Home and deposited into the General Fund. Miners are not required
to pay for their care.
4
Table 1
Arizona Pioneers= Home
Statement of Expenditures
Years Ended or Ending June 30, 1995 through 1997
(Unaudited)
1995 1996 1997
(Actual) (Actual) (Budgeted) 1
Personal services $2,415,465 $2,453,794 $2,418,600
Employee related 786,006 822,815 635,000
Professional and
outside services 123,093 184,127 195,000
Travel 4,107 11,347 5,000
Food 229,273 166,856 225,000
Equipment 38,405 8,609
Other operating 884,921 1,124,208 760,000
Total expenditures 4,481,270 4,771,756 4,238,600
Less residents= payments for care (837,244) (740,821) (857,759)
Net total $3,644,026 $4,030,935 $3,380,841
1 Amounts are based on appropriations plus estimates of nonappropriated monies.
Source:The Uniform Statewide Accounting System Revenues and Expenditures by Fund, Program,
Organization, and Object reports for the years ended June 30, 1991 through 1996; the State
of Arizona Appropriations Report for the year ending June 30, 1997; and the State of Arizona
Proposed Budget FY 1996 and FY 1997 Non-Appropriated Funds.
1986 Report and Follow-up
As part of the current audit, concerns previously identified in the Auditor General=s 1986
performance audit of the Pioneers= Home and Hospital for Disabled Miners (Report 86-6)
were reviewed.
n Need for the Pioneers= Home is changingCThe 1986 audit found that the Pioneers=
Home had fulfilled its original purpose of caring for residents who were active in
Arizona=s early development. Persons meeting the original residency requirements no
longer represented the majority of residents. Rather, statutory admissions requirements
had been modified to allow the Home to become a nursing home for long-time Arizona
5
residents. Also, Yavapai County residents were disproportionately represented in the
Home. Almost 55 percent of the Home=s population came from Yavapai County. Finally,
the number of residents needing skilled care had increased, and questions were raised
concerning the facility=s adequacy in meeting these residents= needs. The report
encouraged the Legislature to review the Home=s role in providing long-term care to
Arizona=s elderly.
Follow-up: As of May 1996, 64 percent of the Home=s residents were from Yavapai
County. The Home=s number of residents requiring skilled care has continued to increase.
Finally, the facility has numerous deficiencies that threaten residents= safety and put the
State legally and financially at risk (see Finding I, pages 9 through 19).
n The Pioneers= Home has inappropriately expended money from the Miners= Hospital
Endowment FundCThe 1986 audit found that the Home had expended monies in the
Miners= Hospital Endowment Fund (Fund) in violation of the Arizona Enabling Act. The
Fund is for the benefit of a disabled miners= hospital. However, the State never built a
hospital but has instead allowed disabled miners to reside at the Home. The Home used
the Miners= Hospital Endowment Fund to support the care of both miners and
nonminers residing at the Home. The report pointed out that the State could be found
liable for inappropriate use of the Fund because a miners= hospital did not exist and the
Home did not provide hospital services. The report presented alternatives to resolve the
problem, including building a miners= hospital or petitioning Congress to change the
Enabling Act.
Follow-up: A miners= hospital has not yet been built, nor has the State petitioned
Congress to change the Arizona Enabling Act. Monies in the Miners= Hospital
Endowment Fund continue to support the Home=s operations, benefiting both miners
and nonminers. Since it is unknown if Arizona needs a miners= hospital, the State should
petition Congress to change the Enabling Act (see Finding II, pages 20 through 24).
n The Pioneers= Home needs to improve its payment for care determinationsCThe 1986
report recommended that the Home improve its payment for care determinations to
comply with legislative intent. The Home did not include all assets in payment for care
determinations as other long-term care programs did. As a result, costs for care were
unnecessarily shifted to state taxpayers. In addition, the Home lacked a policy
concerning the disposal of assets by residents. As a result, residents may have paid less
for their care because they disposed of assets. Finally, the Home failed to verify financial
information reported by potential residents.
Follow-up: The Home still needs to improve its payment for care determinations. The
Home fails to include all resident assets in determining payments. Although the Home
has adopted a policy concerning the disposal of assets by residents, it does not always
comply with this policy; therefore, some residents are treated unfairly. Finally, the Home
still does not verify all financial information (see Finding III, pages 26 through 31).
6
Audit Scope and Methodology
The purpose of this audit was to evaluate the need for and adequacy of the Arizona
Pioneers= Home. This report presents findings and recommendations in four areas:
n The need for critical decisions to be made about the Home=s future;
n The State=s inappropriate use of monies in the Miners= Hospital Endowment Fund to
support the Home;
n The Home=s failure to comply with state law concerning payment for care determinations
and other improvements that can be made; and
n The reduced medical expenses that would result from residents joining a Medicare
Health Maintenance Organization (HMO).
In addition to these audit areas, the report contains a response to the 12 Sunset Factors that
should be considered in determining whether the Arizona Pioneers= Home and Hospital for
Disabled Miners should be continued or terminated (see pages 41 through 43).
During the course of this audit, the Auditor General also conducted a detailed review of the
Home=s accounting system and financial policies and procedures. Problems disclosed by this
review are reported separately in the report Arizona Pioneers= Home Procedural Review as of
November 8, 1996.
This audit used a variety of methods to study the issues presented in this report. Pertinent
information analyzed concerning the Pioneers= Home facility and practices includes:
n Department of Administration engineering, and lead and asbestos studies;
n DHS Fire and Life Safety Code review;
n DHS Nursing Home compliance reviews; and
n Industrial Commission of Arizona, Division of Safety & Health, Full Service Health
survey and Full Service Safety survey.
One hundred and sixteen residents= financial files were analyzed to determine a) the Home=s
compliance with payment for care determination statutes and policies, and b) whether the
Home could become more self-sufficient by revising its payment for care policies. A separate
analysis of 143 residents= financial files was also performed to determine if some residents
could qualify for financial assistance from the Arizona Long Term Care System (ALTCS). In
7
addition, state statutes and the Home=s policies were reviewed. Finally, payment for care
policies and procedures used by pioneers= homes in Alaska and Wyoming were analyzed.
To assess the Home=s expenditures and appropriateness of revenue sources, this audit
reviewed and analyzed state accounting reports from the fiscal years ended June 30, 1991
through 1996; the Arizona Enabling Act and Constitution; Arizona Attorneys= General
opinions; and the Office of the Auditor General=s 1986 Performance Audit of the Pioneers=
Home and Hospital for Disabled Miners (Report 86-8).
Additionally, this audit reviewed and analyzed the Home=s resident census data and other
agency information and records.
Key persons interviewed include the Home=s management, staff, and residents; state
budgeting, accounting, and administration personnel; county assistance programs=
personnel; representatives from a Medicare HMO; and the management of other nursing
homes, Alaska=s and Wyoming=s pioneers= homes, and New Mexico=s miners= hospital.
This audit was conducted in accordance with government auditing standards.
The Auditor General and staff express appreciation to the Superintendent, staff, and
residents of the Arizona Pioneers= Home for their cooperation and assistance throughout the
audit.
8
FINDING I
CRITICAL DECISIONS NEEDED TO
DETERMINE THE HOME=S FUTURE
Three converging factors require that critical decisions be made now regarding the Home=s
future. First, over the years, the Home has fallen into disrepair, and millions of dollars will
be necessary to correct its many building hazards. Second, future sources of funding for the
Home are uncertain. Third, increasing numbers of residents needing skilled care at the
Home contribute to increasing costs. As a result, important questions need to be answered
and options considered concerning the Home=s future.
The Arizona Pioneers= Home was built in Prescott in 1911. The Home is on the State and
National Register of Historic Places and is the third oldest continually occupied state
location. Additions to the original structure have been made over the years; however, the
facility falls short of meeting today=s regulatory requirements in many regards.
Millions of Dollars
Needed to Correct
Building Hazards
The first factor impacting the Home=s future is the need for the State to spend millions of
dollars to correct building hazards at the Home. Significant fire and building code violations
as well as structural and systems problems exist and will be costly to fix. In addition, repair
costs will increase with the required removal of asbestos and lead from the building. Until
these hazards are addressed, residents= safety is questionable, and the State is legally and
financially at risk.
The building hazards discussed in this audit report were identified by a number of state
agencies. The Department of Administration contracted with engineering firms to review
the Pioneers= Home facility in 1996. In addition, a Department of Health Services (DHS)
deputy fire marshal performed a Life Safety Code (used by Medicare) and State Fire Code
inspection of the Home at the request of the Office of the Auditor General. DHS also
performed its annual nursing home compliance review of the Home during the course of
this audit. Finally, a Full Service Health survey and Full Service Safety survey were
conducted by the Industrial Commission of Arizona, Division of Occupational Safety &
Health, in September 1996.
9
Severe fire and code violations existCThe Pioneers= Home is in violation of state fire and
current building codes and has numerous problems with its structure and internal systems,
such as the plumbing, heating, and emergency electrical systems. Costs to remedy these
problems are estimated at over $7.9 million. Table 2 lists the activities by category that are
needed to remedy building problems and their associated repair costs.
Table 2
Arizona Pioneers= Home
Estimated Cost of Repair
Category Cost
Preliminary planning a $ 55,500
Fire safety compliance 345,000
Building code and licensing compliance 2,351,500 b
External structure repairs 608,750
Plumbing, heating, emergency electrical, and interior repairs 1,566,600
Subtotal 4,927,350 c
Lead and asbestos removal 3,000,000
Total $7,927,350
a Preliminary planning includes such activities as preparation of individual floor plans and a master plan
showing both the completed facility plan and individual phasing plans.
b This amount is an average of the low and high estimates provided by the engineering firm to make the
necessary repairs.
c This engineer-provided estimate is intended to give an approximation of the costs. Actual costs will depend
on many factors including the availability of contractors and materials, the final design, and the economic
climate at the time of bidding.
Source: Arizona Pioneers= Home Facility Evaluation Report, TRK Architecture & Facilities
Management, Inc., July 1, 1996. Lead and asbestos removal cost estimate provided by
Department of Administration administrator.
Numerous State Fire Code violations have been identified at
the Pioneers’ Home that would cost an estimated $345,000 to
remedy (see Table 2). Fire safety hazards were found by a Department of Health Services
deputy fire marshal and by Department of Administration contracted engineers. A few of
the Home’s fire safety problems include:
Fire Safety Problems
10
n Inadequate sprinkler systemCThe Home=s sprinkler system takes an excessive amount
of time to fully activate, which would allow a fire enough time to engulf the room of
origin. According to a DHS deputy fire marshal, such a fire would be fatal for the rooms=
occupants. Fire sprinklers are also lacking in the Home=s elevator shaft, laundry chute,
and storage areas under the stairs.
n No smoke detectorsCThere are no smoke detectors in resident rooms and many of the
smoke detectors in the hallways are too far apart. In addition, some of the smoke
detectors may be obstructed by the recently installed cooling system duct work. Because
of these problems, Home residents and staff will have reduced warning time should a
fire occur.
n Cooling system spreads smokeCThe duct work of the Home=s new cooling system
provides paths for smoke to spread throughout the building. In addition, the evaporative
coolers do not automatically shut down when the fire alarm system is activated. If the
evaporative cooling system continued to operate during a fire it would aid the spread
of smoke, potentially jeopardizing residents= and staff=s lives.
n Insufficient exiting systemCThe Home=s exiting system is insufficient for the safe and
timely evacuation of the elderly residents. Top-floor residents have a relatively long and
difficult route to the outside. In addition, the stairwells do not offer shelter from smoke.
Moreover, the exit ramps are exposed to the weather and could be covered with ice or
snow during the winter. Finally, the hallways are not wide enough and are obstructed
with carts, chairs, and oxygen fixtures.
n Inadequate resident doorsCMany of the residents= rooms have only hollow core wood
doors, which are not adequate barriers to heat and smoke.
The Office of the State Fire Marshal stated that the Pioneers= Home facility would not meet
the minimum State Fire Code requirements without major reconstruction or alterations.
Compounding the building=s physical fire hazards is the lack of fire drills and resident fire
training conducted by the Home. For example, state-licensed nursing homes are required
to conduct one fire drill per shift per calendar quarter, or a total of 12 drills a year. Although
exempt from this licensure requirement, in 1995 the Home conducted only three planned fire
drills. In addition, during DHS= group interview of residents in October 1996, residents
voiced concerns about the minimal amount of emergency fire training provided to them.
The Home has numerous instances of noncompliance with the
current building code and violations of the Americans with
Disabilities Act (ADA). Further, although exempt from state
nursing home licensure requirements, the Home=s inability to
meet those standards is another indication of risks to its residents and potential liability to
Building Code, ADA,
and Other Problems
11
the State. To bring the Home into compliance with the current building code, to correct ADA
violations, and to remedy other licensing issues, the State needs to invest an estimated $2.3
million (see Table 2, page 10). The Home=s multiple problems include:
P Nonconforming constructionC According to the Life Safety Code and the Uniform
Building Code, nursing home residents cannot be housed in a building with the Home=s
type of construction, Type III-N, which is masonry exterior walls, concrete structural
frame, and wood floor joist and deck.
P Noncompliance with the building codeCNumerous instances of noncompliance with
the current building code have been identified at the Pioneers= Home. Although some
of the instances of noncompliance are the same as the fire code violations, there are
others that include the building=s height exceeding the maximum allowable for nursing
homes; travel distance to some of the exits exceeding the maximum allowable; and the
width, landing, and handrails of the Home=s stairways not complying with code.
P ADA violationsCThe Home is in substantial violation of the ADA. Areas of the Home
that do not comply with ADA standards include the stairs, elevator, doors, main
entrance, drinking fountains, bathrooms, and signs.
P Licensing issuesCThe Home has a number of deficiencies that would prevent it from
being licensed using standards applicable to skilled care facilities. In addition to
violations of the Uniform Building Code and the Fire Code, the Home is deficient when
evaluated using nursing home guidelines. For example, some resident rooms exceed
maximum per-room occupancy; resident bathing facilities are not of sufficient size; and
the Home does not have a minimum of two elevators as is recommended for the number
of residents living on floors other than the main floor.
There are a number of problems with the Home=s external
structure that would cost an estimated $608,750 to repair (see
Table 2, page 10). These external structure repairs include
fixing the deteriorating mortar; repainting the building;
providing proper support and reinforcement of the roof framing; fixing the corroded, rusted
exterior ramps; and ensuring the posts that hold up the building are properly attached to
the building.
Several problems with the Home=s plumbing, heating, and
emergency electrical systems have been identified, as well as
other problems inside the building. These internal system
improvements would cost an estimated $1,566,600 (see Table
2, page 10). These deficiencies include plumbing problems, heating problems, emergency
electrical problems, and numerous miscellaneous repairs, including new flooring, carpeting,
corridor handrails, and kitchen cabinets and countertops.
External Structure
Problems
Plumbing, Heating
Emergency Electrical,
And Other Problems
12
Repairs would require expensive asbestos and lead paint removalCRepairing the Home
would require costly hazardous material removal. Federal law requires that when
remodeling takes place, all of the hazardous materials in the affected area must be removed.
A DOA administrator estimates the Home=s asbestos and lead paint removal costs would be
approximately $3 million if all necessary improvements were made (see Table 2, page 10).
A 1995 DOA study evaluating asbestos and lead paint at the Pioneers= Home revealed that
the building does contain these hazardous materials. Asbestos was found in the water tank
insulation, floor tiles, and door putty. In addition, lead paint was found throughout the
facility. The Pioneers= Home has no policy or plan for the removal of its hazardous materials.
After an inspection of the Home, Industrial Commission of Arizona, Division of
Occupational Safety & Health officials recommended that the Home develop an operations
and management program to address its asbestos and lead problem for use when
renovations are performed.
Repairs must be made to avoid liabilityC The Home=s residents and the State are at risk if
necessary repairs are not made. In the event of a fire, fatalities may occur for which the State
would be responsible. After completing an inspection of the Home, the DHS Deputy Fire
Marshall concluded that Athe facility does not provide its residents the minimum level of
safety from fire associated with those occupants for a building of this size, height, and
construction.@ In addition, DHS nursing home inspectors cited the Home for a lack of fire
drills and resident fire training. A quote from DHS= recent report states, A. . . the ability of the
facility to meet all potential disasters such as a fire threat is questionable.@ Finally, DOA Risk
Management reviewed these recent inspection reports and concluded that the Home poses
a safety risk to its residents and a liability risk to the State.
Future Sources of
Funding Uncertain
The second factor impacting the Home=s future is the uncertainty of funding sources for its
continued operation. More than 40 percent of the Home=s budget consisted of monies not
legally available for its use in fiscal year 1996. In addition, to cover increasing costs, the non-
General Fund accounts that support the Home have been depleted to low balances. As a
result, a significant increase in additional funding sources is needed to continue the Home=s
operations.
Significant portion of the Home=s revenues consists of monies not legally available to the
HomeCThe Home=s revenues consist of some monies not legally available for its use.
Currently, the Home receives monies from the General Fund, the Miners= Hospital
Endowment Fund, the State Charitable Earnings Fund, and a Donations Fund. However,
the Home cannot legally be supported by the Miners= Hospital Endowment Fund (see
Finding II, pages 20 through 24, for further information on this issue). In fiscal year 1996, the
Home=s net expenditures were more than $4 million, including approximately $1.6 million
13
from the expendable account of the Miners= Hospital Endowment Fund. This accounts for
more than 40 percent of the Home=s net expenditures.1
Additional revenues needed to support the HomeCBecause the expendable balances in the
Miners= Hospital Endowment Fund and State Charitable Earnings Fund are being depleted,
additional revenues will be needed to support the Home. As the Home=s operating costs
have increased over the years, more monies from the Miners= Hospital Endowment Fund
and State Charitable Earnings Fund than these funds= annual revenues have been used to
support the Home. As a result, these funds= year-end expendable balances are decreasing.
For example, in fiscal year 1995, the Miners= Hospital Endowment Fund earned expendable
monies of approximately $1.3 million. However, in that same fiscal year, more than $1.8
million from the expendable account of the Miners= Hospital Endowment Fund was
expended and transferred out to another fund. The Fund=s expendable balance has
decreased from more than $7 million at the end of fiscal year 1993 to less than $5.5 million
at the end of fiscal year 1996.
Likewise, the State Charitable Earnings Fund is being depleted. In the past two fiscal years,
more monies from the State Charitable Earnings Fund than its annual revenues have been
expended. For example, in fiscal year 1995, revenues to this Fund were almost $550,000, but
the Home=s expenditures exceeded the Fund=s earnings by $273,000 that year. At the end of
fiscal year 1994, the cash balance in the State Charitable Earnings Fund was approximately
$375,000. By the end of fiscal year 1996, the cash balance in this Fund was approximately
$45,000.
As the balances in other Pioneers= Home funds decrease, additional revenues will be
required to continue operations at the Home=s current level. Because the expendable cash
balance in the State Charitable Earnings Fund is very low, the Pioneers= Home will be able
to rely only on the annual revenues deposited into the Fund to help support operations. The
median revenues deposited into the State Charitable Earnings Fund in recent years are
approximately $546,500. Without the use of the Miners= Hospital Endowment Fund, and
with the depleted level of the State Charitable Earnings Fund and its limited annual revenue
deposits, the Home will require additional revenues.
Figure 1 (see page 15), shows the Home=s expenditures by fund source in fiscal years 1986
and 1996, as well as an estimate of expenditures by fund source for fiscal year 1998.
1 Net expenditures are the Home=s gross expenditures less payment for care receipts deposited into the
General Fund.
1986
1996
1998
(Estimated)
Figure 1
Arizona Pioneers' Home
Expenditures by Fund Source
Years Ended or Ending June 30,1986, 1996, and 1998
(Unaudited)
Miners' Fund
10.9%
Donations Fund
1.4%
Charitable Fund
11.5%
General Fund
76.2% $1,764,155
252,283
264,871
31,123
General Fund (net)
Miners' Hospital Endowment Fund
State Charitable Earnings Fund
Donations Fund
Total $2,312,432
General Fund (net) $1,272,836
Miners' Hospital Endowment Fund 1,623,264
State Charitable Earnings Fund 1,081,775
Donations Fund 53,060
Total $4,030,935
General Fund (net) $1,339,241
Miners' Hospital Endowment Fund 1,933,000
State Charitable Earnings Fund 549,700
Donations Fund 53,000
Total $3,874,941
a
Donations Fund
1.3% General
Fund
31.6%
Miners' Fund
40.3%
Charitable Fund
26.8%
a
The General Fund expenditures are reported net of residents' payments for care reimbursed to the General Fund.
General
Fund
34.5%
Miners' Fund
49.9%
Charitable Fund
14.2%
Donations Fund
1.4%
a
a
Auditor General staff analysis of information contained in the Office of the Auditor General Report
#86-8, the Uniform Statewide Accounting System reports for the years ended June 30, 1991
through 1996; the State of Arizona Proposed Budget FY 1998 and FY 1999, Analysis and
Recommendations; and the State of Arizona Annual Budget FY 1998 and FY 1999 Non-
Appropriated Funds.
Source:
15
Increasing Number of
Residents Needing Skilled
Care Is Costly
The third factor impacting the Home=s future is the growing number of residents needing
skilled care at the Home and the greater cost to provide this type of care. The number of
residents needing skilled care has increased significantly.
There are three levels of care that are offered at the Home: personal, intermediate, and
skilled. Personal and intermediate care levels are for more independent residents who
require only minimal assistance with daily living activities, such as guidance to the dining
room and assistance with bathing. In contrast, skilled care residents require complete care
24 hours a day.
Number of skilled care residents is increasing and is costlyCThe number of Pioneers= Home
residents requiring skilled care is increasing and is costly. In 1983, only 8 skilled care
residents per month, on average, lived at the Home. In 1986, this number had increased to
18. As of October 1, 1996, 45 skilled care residents resided at the Home. The Home=s nursing
staff indicated that this trend will continue because the Home is admitting people who are
in need of much more care upon admission than in the past. According to nursing staff, new
residents are not as independent upon entry as new residents had been several years ago,
and they move to the skilled care level much more quickly.
This growth in the number of skilled care residents is significant because of the higher costs
to provide skilled care. The Pioneers= Home management estimated that for fiscal year 1996,
it cost $1,442 per month to provide services to one personal care resident, $2,287 per month
for an intermediate care resident, and $3,589 per month for one skilled care resident.
However, the maximum monthly amount residents can be charged is not based on level of
care. Rather, A.R.S. '41-923(D) states that the charge cannot be in excess of the average
monthly per capita cost of operating the Home. As a result, the Home establishes a
maximum monthly amount residents can be charged regardless of the level of care they are
receiving. For fiscal year 1996 the maximum monthly amount residents could be charged
was $2,205. Other nursing homes charge more to care for skilled care residents than
intermediate and personal care residents.
Options Need to
Be Considered
Due to the serious problems facing the Arizona Pioneers= Home, important options need to
be considered in determining the Home=s future. A committee of experts and interested
parties should assemble to consider various options and make a recommendation regarding
the Home=s future to the Legislature.
16
Committee should be organizedCBecause decisions affecting whether the Home can, or
should, continue as a health care facility are governed by many different organizations, the
Legislature should establish a special committee to discuss the Home=s future and develop
recommendations. The following parties should be included on the committee:
n Legislators n Governor=s Office
n Department of Health Services n Office of the State Fire Marshal
n Attorney General=s Office n Governor=s Council on Aging
n Department of AdministrationC n Superintendent of the Arizona
(Risk Management and General Services) Pioneers= Home
n Residents
Because of the Home=s substantial safety problems, this committee should be established
immediately to address current risks to the Home=s residents and the potential liability to
the State.
Several options for considerationCOnce the committee has been formed, there are several
options for consideration, including:
n Refurbish and continue the Pioneers= HomeCThe Home could be refurbished and
continue operations. In order to do so, the State would need to expend an estimated $7.9
million to improve the facility and make it safe for residents. The Legislature could also
build a new facility, and DOA has estimated this would cost $10 million. The Legislature
would also need to identify additional revenues to replace monies currently being used
from the Miners= Hospital Endowment Fund and the now-depleted State Charitable
Earnings Fund to cover increasing costs.
There are a number of benefits to keeping the Home open. The long-time state tradition
of a Pioneers= Home would continue. In addition, approximately 160 residents who have
lived in the State for 30 years or more could continue to reside at the Home and need not
be displaced. The Home could also continue to provide the three levels of care it
currently offers.
n Reduce scope of operationsCThe scope of the Home=s operations could be reduced. The
Home could limit the care it provides to only the personal care level. Through the use
of exit criteria, the Home could discharge to other nursing homes those residents who
need higher levels of care. Further, the Home could limit the number of personal care
residents and staffing levels to correspond to available funding. Specifically, fewer
nursing staff would be needed for personal care residents. Based on historical financial
data, revenues deposited into the State Charitable Earnings Fund have supported
approximately 32 personal care residents annually. If the Home wanted to serve
17
additional personal care residents, additional monies would be required at an estimated
rate of more than $17,000 annually per additional resident.
Even with a reduced scope of operations, the Legislature would still need to address
building problems. However, by reducing the number of residents at the Home, the
amount of necessary refurbishment to the facility may be less. For example, not using
the third floor could eliminate repair costs for third-floor exit ramps and third-floor ADA
compliance problems. Necessary improvements and their associated costs cannot be
determined until decisions are made concerning the number of residents and level(s) of
care to be provided.
There are a number of benefits to reducing the scope of the Home=s operations. By
limiting services to the personal care level, the Home=s operations would better reflect
its original intent to serve as a retirement home rather than a full-service nursing home.
In addition, the Home=s population and staffing would better correspond to available
funding.
n Phase out and close the HomeCThe Pioneers= Home could be closed immediately or
phased out. A phase-out would provide transition time for residents to find new places
to live and for staff to find new employment. The Home could stop accepting new
admissions, and current residents could move elsewhere or choose to remain at the
Home until it closed. If the Pioneers= Home were closed, the State would not be obligated
to continue to care for residents currently living at the Home.
There are a number of benefits to phasing out and closing the Pioneers= Home. Upon
closure, the residents and the State would no longer face safety and liability risks due
to the facility=s poor condition. In addition, the current $2.35 million of net General Fund
monies and State Charitable Earnings Fund monies that are used to operate the Pioneers=
Home could be used for other purposes. Finally, depending on how quickly the Home
is phased out, fewer repairs would need to be made to the 85-year-old building. For
example, an engineer who evaluated the building estimated that under a 5-year phase-out,
only one-third of the fire, plumbing, heating, and electrical system repairs would
be necessary. Again, specific cost estimates cannot be developed until policy decisions
are made concerning the Home=s future.
If the Home were closed, the State would have to decide what to do with the Pioneers=
Home building and property on which it is located. The building is on the State and
National Register of Historic Places; therefore, the State has to comply with Arizona=s
historic preservation statutes in remodeling the building or deciding what to do with it.
The property on which the facility is located would remain the State=s and would not
revert to the heirs of the individuals who deeded it to the State.
18
Recommendations
1. The Legislature should establish a special committee to make a recommendation
regarding the Home=s future. The committee should include the following parties:
legislators, Governor=s Office, Department of Health Services, Office of the State Fire
Marshal, Attorney General=s Office, Governor=s Council on Aging, Department of
Administration (Risk Management and General Services), and residents.
2. The Committee should consider such options as:
a. Refurbishing and continuing the Pioneers= Home;
b. Reducing scope of operations; and
c. Phasing out and closing the Home.
19
FINDING II
STATE CONTINUES TO EXPEND MONIES IN
MINERS= HOSPITAL ENDOWMENT FUND
IN VIOLATION OF ENABLING ACT
The State continues to expend monies in the Miners= Hospital Endowment Fund in violation
of the Arizona Enabling Act. A 1986 Office of the Auditor General audit of the Arizona
Pioneers= Home, an Attorney General opinion, and a subsequent informal Attorney General
opinion determined that expenditures from this Fund to support the Home were
inappropriate; however, these expenditures continue. As a result, the State could be found
liable for the improper use of an increasing amount of monies. To resolve this issue, the
Legislature should petition Congress to change the Arizona Enabling Act.
Use of the Miners=
Hospital Endowment
Fund Remains Inappropriate
Continued use of the Miners= Hospital Endowment Fund to support the Home is
inappropriate. A 1986 audit found that the Home=s use of this Fund violated the Enabling
Act, and a 1988 statutory change failed to rectify the problem.
Previous audit and Attorney General opinion found the Home=s use of the Miners= Hospital
Endowment Fund inappropriateCA 1986 Office of the Auditor General report on the Arizona
Pioneers= Home (see Report 86-8) found that the Home had inappropriately expended
monies in the Miners= Hospital Endowment Fund.1 Additionally, a 1987 Attorney General
opinion (I87-070) concluded that monies in the Miners= Hospital Endowment Fund cannot
be used to support the Arizona Pioneers= Home. The opinion states in part:
The clear language in the. . . Arizona Enabling Act restricts the use of funds from the [Miners=
Hospital] Endowment Fund to support and maintain a separate hospital for disabled miners.
Arizona has never built such a hospital, and the Arizona Pioneers= Home is neither a separate
facility for miners, nor is it licensed as a hospital to provide both surgical and non-surgical care.
1 This finding is based on Arizona Legislative Council opinion 86-5 that states in part: AThe use of the Miners=
Hospital Endowment Fund for any purpose other than the care of miners in a miners= hospital is inappropriate.@
20
Although the Arizona Enabling Act and A.R.S. direct the State to establish a hospital for
disabled miners, such a hospital has never existed. The U.S. government, in the Arizona
Enabling Act, set aside 50,000 acres of land for disabled miners= hospitals. On February 20,
1929, an additional grant of 50,000 acres was made for the same purpose. That same year,
the Arizona Legislature passed a law to establish a miners= hospital adjacent to the Pioneers=
Home; however, the hospital was never built.
Rather than building a hospital for disabled miners, the State has allowed the Pioneers=
Home to admit and care for miners who meet the hospital=s statutory admission
requirements. The Miner=s Hospital Endowment Fund expendable account is used to pay
for the care of both miners and nonminers residing at the Home. These monies have paid
for personal services, employee-related expenditures, food, and other operating expenses.
Use of this Fund to support the Home violates the conditions of the Enabling Act because
the Pioneers= Home does not provide many services commonly provided by a hospital,
including surgical care.
1988 law change did not rectify problemCA 1988 law change failed to legally allow the
Miners= Hospital Endowment Fund to support the Home. In an attempt to enable the Home
to legally use the Miners= Hospital Endowment Fund, the Legislature passed Laws 1988,
Chapter 90, '3, amending the statute (A.R.S. '41-941) related to the location of the Hospital
for Disabled Miners. Formerly, the statute stated that the Hospital would be adjacent to the
Pioneers= Home. The amendment provided:
A. There shall be a state hospital for disabled miners as a separate facility for the benefit of
disabled miners at the Arizona pioneers= home at Prescott. . . (emphasis added)
A subsequent informal Attorney General opinion concluded that the change to the statutes
did not enable the Home to use the Miners= Hospital Endowment Fund. In the 1989 letter,
an Attorney General special counsel stated:
Although the 1988 amendment to '41-941(A) provided that the hospital be a separate facility, this
does not satisfy the requirement of the Arizona Enabling Act that money in the [Miners=
Hospital] Endowment Fund be expended for only the construction, maintenance and operation
of a general hospital for disabled miners. We are not aware of anything that would lead us to
conclude that a licensed general hospital for disabled miners presently exists or will be constructed
at the Arizona Pioneers= Home so that expenditures from the Disabled Miners= Endowment Fund
would be authorized.
Further, even if the Miners= Hospital Endowment Fund could be legally used to support the
Home, the Fund supports a disproportionate percentage of the Home=s budget when
21
compared to the number of miners residing at the Home. For example, in fiscal year 1995,
14 of the 177 residents living at the Home during the course of the fiscal year were miners;
however, in that same fiscal year, the Miners= Hospital Endowment Fund expendable
account supported $1.8 million, or almost 50 percent, of the Home=s net expenditures.
State Could Be Liable
for Improper Use of Miners=
Hospital Endowment Fund
The State of Arizona could be found liable for the improper use of the Miners= Hospital
Endowment Fund. A 1986 Office of the Auditor General report on the Arizona Pioneers=
Home concluded that Arizona may be liable for inappropriate use of the Fund because it
did not comply with the intent of the Enabling Act. Further, the Home has illegally
transferred monies from the Miner=s Hospital Endowment Fund expendable account.
State could be liable for monies improperly expendedCA 1986 Office of the Auditor General
report on the Arizona Pioneers= Home (see Report 86-8) concluded that Arizona may be
liable for inappropriate use of the Miners= Hospital Endowment Fund because it had not
complied with the terms of the Enabling Act. The report=s conclusion is based on a miners=
hospital case in New Mexico. The state was found guilty of a breach of trust in handling its
miners= hospital. It had operated a licensed and certified general hospital for miners from
1905 until 1971, and in 1971, when the hospital=s accreditation was allowed to lapse, the state
paid miners= medical bills at other institutions using the Miners= Hospital Endowment Fund.
Subsequently, the U. S. government and a group of New Mexico disabled miners filed suit
against the state, claiming the miners were not receiving the care intended by the terms of
the trust agreement set forth in the New Mexico Enabling Act.
The Federal District Court found New Mexico in violation of the Enabling Act. The Court
ruled that New Mexico could not expend trust monies at other hospitals, even though the
money was being used to provide health care to miners. The Court further ruled that the
trust monies could be used only for the facility the state operated as a miners= hospital. The
Court ordered New Mexico to restore money inappropriately spent, with interest, to the
Miners= Hospital Endowment Fund, and to construct a licensed and certified general
hospital. The Tenth Circuit Court of Appeals affirmed the District Court=s decision. New
Mexico officials indicated that because of the Court=s ruling they were required to pay
approximately $1.9 million to the Miners= Hospital Endowment Fund. In addition, they
estimated it cost an additional $3 million from the Fund to restore the miners= hospital to a
licensed and certified general hospital for the care of miners. Likewise, over $11 million has
been expended from the Miners= Hospital Endowment Fund to support the Arizona
Pioneers= Home, and the State could be found liable for its inappropriate use and be made
to repay the money with interest.
22
Monies in Miners= Hospital Endowment Fund illegally transferred to another fundCThe
Pioneers= Home has transferred monies in the expendable Miner=s Hospital Endowment
Fund account to another fund in violation of the Constitution. In fiscal years 1991 through
1996, the Pioneers= Home has transferred monies from the Miner=s Hospital Endowment
Fund expendable account to the State Charitable Earnings Fund. These inappropriate
transfers total more than $1.9 million.
The Arizona Constitution prohibits commingling of funds associated with state trust lands.
Article 10, '7, states in part:
Section 7. A separate Fund shall be established for each of the several objects for which the said
grants are made and confirmed by the said Enabling Act to the State, and whenever any moneys
shall be in any manner derived from any of said lands, the same shall be deposited by the State
Treasurer in the fund corresponding to the grant under which the particular land producing such
moneys was, by said Enabling Act, conveyed or confirmed. No moneys shall ever be taken from
one fund for deposit in any other, or for any object other than that for which the land producing
the same was granted or confirmed . . .1
The Legislature Should Petition
Congress to Change
the Enabling Act
In order to legally use the Miners= Hospital Endowment Fund, the State could either build
a hospital for disabled miners or petition Congress to change the Arizona Enabling Act. The
State could fulfill the conditions of the Enabling Act by building a licensed and certified
general hospital to care for disabled miners; however, the need for a disabled miners=
hospital is unclear. Further, it would be costly to build and operate a hospital.
Additionally, it may be difficult for the Miners= Hospital Endowment Fund to afford the cost
of building and supporting a hospital. At the end of fiscal year 1996, the Fund had an
expendable balance of only approximately $5.5 million. In addition, the nonexpendable
accounts in the Fund and the lands set aside in trust for disabled miners= hospitals may not
earn enough interest and revenues annually to support a hospital=s ongoing operations.
A more realistic option may be to request that Congress change the Arizona Enabling Act
to legally allow the State to use the Miners= Hospital Endowment Fund effective back to
1933, when the State began using the Fund. Arizona and New Mexico have successfully
petitioned Congress to change their Enabling Acts in the past. In addition, New Mexico
plans to petition Congress to change provisions in its Enabling Act in the spring of 1997.
Arizona=s Enabling Act could be changed to allow the Miners= Hospital Endowment Fund
1 This provision was taken from Section 28 of the original Enabling Act.
23
to be used to care for disabled miners wherever they reside, which would include the
Pioneers= Home and other settings, such as private hospitals and nursing homes.
Alternatively, the Arizona Enabling Act could be changed to allow the Miners= Hospital
Endowment Fund to be used for purposes other than the care of disabled miners. Other state
land trust funds support such purposes as public education and corrections.
Recommendations
1. The Legislature should discontinue appropriating, and the Arizona Pioneers= Home
should discontinue using, monies from the Miners= Hospital Endowment Fund.
2. The Legislature should decide for what purposes it would like to use the Miners=
Hospital Endowment Fund and consider a resolution requesting Congress to change the
Arizona Enabling Act to legally allow the State to use the Miners= Hospital Endowment
Fund for those purposes.
24
FINDING III
THE HOME COULD RECOVER ADDITIONAL
COSTS BY COMPLYING WITH STATUTES
AND IMPROVING PRACTICES
The Arizona Pioneers= Home needs to follow state statutes and improve existing practices
to increase recovery of the General Fund costs and to ensure residents are treated equitably.
Statutes require that residents contribute to the cost of their care to help offset the State=s
costs of operating the Home. By calculating resident payments for care in accordance with
statute, the Home could recover as much as $1 million more for the General Fund each year.
In addition, the Home could better ensure payment for care determinations are accurate and
equitable by improving current policies and procedures. Finally, the Home could recover
approximately $41,500 more for the General Fund by helping qualified residents enroll in
financial assistance programs.
A.R.S. '41-923 requires residents to pay the costs incurred by the State for their care. As
required by statute, the Home determines an average cost of care by dividing the total costs
to operate the Home by the average number of residents. The amount is recalculated each
fiscal year. The amount was $2,205 per resident per month for fiscal year 1996. For fiscal year
1997, the amount increased to $2,497 per resident per month.
Residents pay for their care based on their financial ability. Each February, the Home
calculates residents= monthly payments by totaling their income from all sources and
subtracting expenses for items such as supplemental health insurance and a monthly $140
personal allowance. In fiscal year 1996, the Home=s residents paid a total of $816,461 for their
care. A.R.S. '41-924(D) requires the Home to deposit these monies into the General Fund,
and these payments offset a portion of the approximately $2 million appropriated from the
General Fund to operate the Home in fiscal year 1996.
The Home Should Determine
Resident Payment for Care
in Accordance with Statute
The Home should change how it determines payments for care to comply with state law by
including all residents= resources. Currently, the Home=s method of determining resident
payments does not conform with state law. Consequently, the State subsidizes the care of
some residents who would not otherwise qualify for financial assistance.
25
The Home does not determine resident payments for care according to statuteCThe Home
does not comply with legislative intent in determining payments for care since it does not
include the full value of residents= assets. A.R.S. '41-923(D) requires residents to pay for
their care based on their ability. According to statute, the Home is to include income and the
full value of assets in determining the amount residents will pay. However, in payment for
care calculations, the Home includes income only from sources such as Social Security and
pensions, and any income, such as interest, that assets may produce. Since the Home does
not take into account the full value of residents= assets, residents are allowed to keep assets
such as bank accounts and certificates of deposit (CDs), which would otherwise be used to
pay for their care. As a result, some residents of the Pioneers= Home have maintained large
estates while receiving state-subsidized care.
The State subsidizes the care of some residents who would not qualify for assistance
elsewhereCCurrently, the State subsidizes the costs of providing care to the Home=s
residents; however, many residents own substantial assets and would not be eligible for
financial assistance if they lived elsewhere. Specifically, a review of 116 resident financial
files found that these residents received estimated state subsidies of $2.5 million between
February 1, 1996, and January 31, 1997.1 These residents contributed an estimated $758,000
toward their care. However, if the Pioneers= Home had included the full value of assets in
payment for care calculations, as required by law, these residents could have contributed an
estimated $1.8 million toward their care, reducing state subsidies by approximately $1
million. Table 3 (see page 28), illustrates the actual subsidies three residents received in
February 1996. The three residents paid $2,979 for their care, and received state subsidies of
$3,636. These residents, however, should have paid $6,615, the full cost of care. To comply
with statute, the Home should include the value of assets in payment for care
determinations for current and incoming residents.
Residents of other nursing homes in Arizona must pay the full cost of their care using any
means available. Elderly residents of other nursing care facilities become eligible for public
financial assistance only after expending their assets to a minimum level. In addition, Alaska
and Wyoming, the only other states with pioneers= homes, require residents of their
pioneers= homes to pay the full cost of care using both assets and income. Only residents
whose income and assets are below specified amounts pay less than the maximum rates
these homes charge.
1 Files reviewed were for those residents who were admitted to the Home prior to February 1, 1996, and who
still resided there as of October 1, 1996. Assets were valued as of February 1996. The analysis was
performed in October 1996 and any projected estimates are based on the assumption that these residents
continued to reside at the Home through January 31, 1997.
26
Table 3
Arizona Pioneers= Home
Monthly Fee for Care, Payments for Care,
State Subsidies, and Assets
for Three Residents
February 1996
(Unaudited)
Monthly Fee Residents= State Residents=
Resident for Care Payments Subsidies Assets 1
A $2,205 $1,164 $ 1,041 $250,000
B 2,205 1,041 1,164 223,000
C 2,205 774 1,431 224,000
Total $6,615 $2,979 $3,636 $697,000
______________
1 Assets were valued as of February 1996.
Source: Auditor General staff analysis of three residents= financial statements submitted to the
Home for the February 1996 payment for care determination.
Many Problems Exist
with the Home=s Payment
for Care Determinations
In addition to following statute, the Home needs to improve the consistency and accuracy
of its payment for care determinations. A review of financial files for 116 residents showed
that the Home=s management does not consistently follow its written policies, and does not
always accurately calculate assessments. To help ensure residents are treated consistently
and equitably, the Home needs to draft administrative rules for determining payments for
care.
The Home fails to adhere to its payment for care policiesCThe Home fails to follow its
current policies for determining how much residents will pay for their care. Consistent
policy application could reduce the amount the State must pay to support residents.
Specifically, the Home needs to improve its efforts in the following areas:
27
n Verification of financial informationCBecause the Home=s management does not verify
residents= financial information in accordance with statute, the Home may incorrectly
charge some residents. As previously reported in the 1986 Sunset review of the Home,
A.R.S. '41-923 requires the Home=s Superintendent to verify all applicant and resident
financial information. However, no verification is done. The Home=s management relies
on financial information self-reported by applicants and residents to calculate payment
for care amounts. In addition, when residents have not reported the interest rates earned
by some assets, the Home=s management has estimated interest earnings to calculate
payments for care.
n Disposition of assetsCAccording to the Home=s policies, residents= payment for care
determinations consider assets residents dispose of after being accepted into the Home.
Residents are also required to report any assets disposed of two years prior to entering
the Home. If residents dispose of assets while residing at the Home or during the two
years prior to admission, their payment for care determinations should continue to
include the assets= potential income based on the assets= original values. However, a
review of residents= financial files showed that the assets residents listed upon admission
to the Home were not always reported on subsequent financial statements. For example,
one resident listed bank accounts and CDs worth approximately $19,000 upon admission
to the Home in 1994. On this resident=s 1996 financial statement, only a checking account
worth $1,300 was reported. The Home=s management did not include the original assets=
value of $19,000, or the interest earned, in the 1996 payment for care calculation.
In other instances, when previously reported assets do not reappear on updated financial
statements, the Home=s management appears to inconsistently use information from
previous financial statements to calculate payments for care. For example, one resident
reported two CDs worth approximately $10,000 and $3,200 on her 1994 financial
statement but did not include them on her 1996 financial statement. The Home=s
management included only the $10,000 CD in the resident=s 1996 payment for care
calculation.
n Nonpayment of assessmentsCAccording to written policy, if residents lack sufficient
liquid assets to pay for their care, the Home may suspend monthly payments and require
residents to repay these charges once assets are sold. However, the Home does not
enforce this policy. For example, one resident has substantial real estate holdings but
lacks the liquid assets needed to pay for care at the Home. The Home=s management
agreed to suspend this resident=s monthly payments beginning in January 1996. The
Home=s management does not plan to recover these payments once assets are sold. The
suspended payments total approximately $25,715 for 11 months of care.
n Deductions from payments for careCThe Pioneers= Home does not consistently apply
its policies regarding deductions from resident payments for care. The Home=s policies
allow residents the following deductions from their payments for care: expenses
incurred in generating income, a medical insurance policy premium, and a $140 monthly
personal living allowance. However, the Home treats residents inequitably by allowing
28
some residents to deduct additional expenses, such as credit card bills and storage unit
rental fees. Financial files sampled for 116 residents showed that the Home=s staff
allowed 6 residents and 1 couple to deduct nonallowable expenses from their payments
for care. These deductions reduced monies the Home remitted to the General Fund by
an estimated $7,100 between February 1, 1996, and February 1, 1997. Other residents
reported similar expenses, but they were not allowed the deductions.
The Home does not properly calculate payments for careCThe Arizona Pioneers= Home fails
to accurately calculate resident payments for care. The Home=s policies state that income,
such as interest earnings, will be included in determining a resident=s ability to pay;
however, the Home=s management sometimes ignores interest earnings. Moreover, these
omissions, along with other errors, make several of the Home=s payment for care calculations
inaccurate. For example, based on information contained in resident financial files:
n The Home undercharged one resident approximately $47 per month because
management did not include interest earnings in this resident=s payment for care
calculation. Between February 1, 1996, and January 31, 1997, the Home could have
collected as much as an additional $560 if the payment had been calculated correctly.
n The Home overcharged one resident approximately $35 per month because management
incorrectly calculated the resident=s payment for care amount. The resident overpaid the
Home an estimated $420 between February 1, 1996, and January 31, 1997.
The Home needs to establish administrative rules for determining payments for careCThe
Home has not promulgated rules to ensure it is recovering as much of the State=s costs as
possible and to ensure that residents are treated equally. A.R.S. '41-1003 requires state
agencies to adopt rules detailing requirements of all formal procedures that impact the
public. According to Attorney General staff, the Home must establish administrative rules
for its payment for care determinations. The Home has been aware that rules were necessary
since the 1986 Sunset review by the Office of the Auditor General (see Report 86-8). At that
time, the Home=s Superintendent indicated that the Home planned to propose rules for
determining resident payments for care, but no rules have been promulgated.
In addition to codifying some existing payment for care policies, the Home should write
additional rules as needed to collect monies. For instance, the Home should draft a rule
enabling the State to recover all monies spent toward residents= care. Currently, none of the
Home=s residents are required to pay the Home=s monthly rate of $2,497; therefore, the State
is subsidizing the costs of providing care to residents. When elderly residents at other
nursing homes receive similar public financial assistance, federal law requires the State to
attempt to recover these monies from the individuals= estates.
29
The Home Could
Further Increase Revenues
to the General Fund
The Home=s management could recover an estimated $41,500 more each year by assisting
qualified residents to obtain financial assistance from the Arizona Long Term Care System
(ALTCS) to pay health insurance costs.1 The Home requires residents to purchase Medicare
Part B insurance, which cost $42.50 per month in 1996. Residents must also purchase
supplemental health insurance policies to pay expenses such as Medicare deductibles and
related costs. Residents deduct both of these insurance premiums from their monthly
payments for care to the Home. Based on a review of financial files for 143 residents, as
many as 38 residents may be eligible to have ALTCS pay their Medicare Part B premiums.
This financial assistance could enable the Home to recover an additional $19,380 from
residents per year. In addition, 21 of these residents may qualify for additional ALTCS
assistance to pay Medicare deductibles and related costs. These residents would no longer
need to purchase supplemental health insurance, which could further increase the amount
these residents pay for their care by an estimated $22,151 each year.
Recommendations
1. The Home should comply with A.R.S. '41-923(D) by including the full value of residents=
assets as well as income in payment for care determinations.
2. The Home needs to ensure that resident-provided financial information is documented
and verified in compliance with A.R.S. '41-923. In addition, if verification reveals
residents have spent or otherwise disposed of assets for purposes other than to pay for
their care, the Home should continue to include the value of these assets in payment for
care calculations.
3. The Home should ensure resident payment for care determinations are calculated
accurately and that payment for care policies are applied consistently to all residents.
4. The Home needs to establish payment for care policies in rule to comply with A.R.S. '41-
1003. Further, the Home should draft additional rules as necessary to enable the Home
to attempt to recover all state monies paid toward a resident=s care from the resident=s
estate.
5. The Home should assist qualified residents to obtain financial assistance from the
Arizona Long Term Care System (ALTCS) to pay health insurance costs.
1 ALTCS is administered through the Arizona Health Care Cost Containment System (AHCCCS) to provide
long- term care services to financially and medically eligible Arizona residents. ALTCS is funded by
federal, county, and state monies.
30
FINDING IV
THE HOME COULD REDUCE MEDICAL EXPENSES
IF RESIDENTS JOIN A MEDICARE HMO
The Arizona Pioneers= Home should select a more efficient method of providing medical
care to its residents. The Home is required to furnish residents with necessary medical care,
but its current practices are not cost-effective. A viable alternative would be to pursue
services through a Medicare Health Maintenance Organization (HMO). The Home needs
approval from the State Procurement Office and a statutory provision to enable it to select
the most cost-effective means to provide medical care to its residents and to realize the
greatest cost savings.
Current Medical
Provisions Are Costly
The Home provides its residents with medical care, which cost more than $600,000 in fiscal
year 1996. The Pioneers= Home, unlike other nursing homes in the State, must pay for any
necessary medical treatments its residents receive. To meet its statutory obligation, the Home
furnishes residents with access to physicians, medications, and other medical services, and
pays the associated expenses.
The Home must provide medical careCUnlike other private and nonprofit nursing homes
in the State, the Arizona Pioneers= Home is statutorily required to provide its residents with
medical care. A.R.S. '41-924(B) states:
The superintendent shall admit persons to the home and shall see that persons admitted to the
home are comfortably cared for, fed, clothed and furnished with necessary medical treatment.
Other private and nonprofit facilities provide nursing care but are not financially
responsible for other medical costs, such as medications and special therapies. Residents of
these other facilities must pay for any additional necessary medical services themselves. If
a resident is unable to pay for needed medical care, he or she may receive assistance from
the Arizona Long Term Care System (ALTCS).
The Home=s current method of providing medical care is expensiveCTo fulfill its statutory
mandate, the Home furnishes residents with free access to physicians, medications, and
other medical services, which are costly. To provide most of the medical attention residents
need, the Home contracts with doctors to serve residents twice each week at an in-house
31
clinic. The clinic doctors, with the assistance of the Home=s nursing staff, provide routine
medical care to residents. If residents need additional services, such as those offered by
specialists or hospitals, the Home transports residents to the service providers and assumes
responsibility for the costs. The Home also pays for any prescription drugs or other medical
supplies residents need.
The Pioneers= Home spent more than $600,000 to provide necessary medical care to residents
in fiscal year 1996, not including nursing care costs. The Home paid doctors approximately
$100,000 to staff its in-house clinic. The Home also paid approximately $355,000 for items
such as medical supplies and prescription drugs, and for the services of laboratories and
specialists. In addition, residents were allowed to deduct approximately $209,000 from their
monthly payments for care for Medicare and supplemental health insurance coverage,
which are required by the Home.1
The Home has attempted to recover some of its medical costs by billing Medicare and
secondary insurance companies, but these efforts have produced limited results. Accounting
staff estimate that they spend 20 to 30 hours per week performing medical billing activities;
however, the Home received only about $69,000 in reimbursements in fiscal year 1996. The
Home potentially could have recovered approximately $91,000 more, but staff indicated they
currently lack the equipment, training, and personnel needed to ensure the Home is
receiving all insurance reimbursements. The Home maintains all medical billing files
manually, and accounting staff stated the current system makes it difficult to determine
which bills have been reimbursed. According to staff, the Home needs to computerize its
medical billing activities and hire a qualified medical billing clerk to ensure the Home
recovers as much as possible from insurance companies. The Home=s management expects
to implement a computerized billing system in 1997.
Savings of $190,000 Possible
with Medicare HMO
Although improved billing could recover additional monies, using a Medicare HMO would
eliminate medical billing activities and, at the same time, save the Home more than it could
collect from insurance companies. With the Medicare HMO currently available in Prescott,
residents would have access to medical services the Home currently provides. These
services, however, would be obtained at a reduced cost, saving the Home as much as
$190,000 each year.
Residents would continue to receive medical careCAs Medicare HMO members, residents
would continue to receive medical services that the Pioneers= Home currently provides. For
instance, residents would receive services from specialists such as chiropractors,
1 Fiscal year 1996 insurance premiums included Medicare Part B premiums of approximately $72,930 and
premiums of approximately $136,000 paid to supplemental insurance companies. These premiums are
deducted from residents= monthly payments for care, which are remitted to the General Fund.
32
psychiatrists, and radiologists when necessary. Residents would also receive preventative
health care, such as routine physical examinations, cancer screenings, and immunizations.
In addition, residents may be able to continue seeing their current physicians since the
Home=s in-house clinic doctors are affiliated with the Medicare HMO.
Medicare HMO-provided services are less costlyCIf residents join a Medicare HMO, the
Pioneers= Home could reduce its medical costs by approximately $190,000 each year and still
provide the same level of care to residents.1 The Medicare HMO currently available in
Prescott does not require applicants to receive physical examinations or fill out health
questionnaires to enroll, and the premium charged to members is $65 per month regardless
of age or health problems.2 The Medicare HMO would provide physicians= services, which
could save the Home more than $29,000 each year. The Medicare HMO also pays for some
prescription drugs, ambulance and radiology services, and hospitalization, which could
save the Home an estimated $137,000 annually. In addition, since the Medicare HMO=s
premiums are lower than what most residents currently pay for supplemental insurance, the
Home could collect approximately $24,000 more in payments for care annually.3 Table 4 (see
page 35), details the medical services provided to residents and related costs, the estimated
costs of these same services if all residents were Medicare HMO members, and the estimated
savings.
Requiring residents to join the Medicare HMO would also enable the Home to operate more
efficiently. For instance, nursing staff currently assist doctors at the in-house clinic.
Eliminating the clinic would enable these nurses to spend this time each week serving
residents. In addition, accounting staff would no longer need to process bills to Medicare
and supplemental insurance companies. Rather, the Home would pay $10 each time a
resident receives services from his or her primary care physician, and not receive any
additional paperwork or bills. Since the Medicare HMO would eliminate medical billing
activities, accounting staff would have time to correct the deficiencies in the Home=s
accounting processes noted in the Office of the Auditor General 1996 procedural review of
the Arizona Pioneers= Home (see Arizona Pioneers= Home Procedural Review as of November 8,
1996).
1 Residents may need to leave the Home to see their Medicare HMO physicians, and the Pioneers= Home
Superintendent estimates that the Home would need an additional van and driver to support the increased
transportation needs. The estimated savings do not include these potential transportation costs.
2 To be eligible to join the Medicare HMO, an individual typically must be at least age 65; enrolled in
Medicare Part A and Part B; and must not have kidney failure, be on dialysis, or have had a kidney
transplant within the past 36 months.
3 Residents deduct premiums for supplemental health insurance from their monthly payments for care. Since
the HMO premiums are lower than what most residents currently pay, monthly deductions would be less,
and payments for care higher if residents are Medicare HMO members.
33
Table 4
Arizona Pioneers= Home
Comparison of Annual Actual Medical Expenditures
to Estimated HMO Medical Costs
Year Ended June 30, 1996
(Unaudited)
Actual Net Estimated Estimated
Type of Service 1 Expenditures 2 HMO Costs Annual Savings
Prescription drugs/medical supplies $322,917 $217,467 $105,450
Insurance premiums 208,934 184,470 24,464
Physicians and medical director 58,843 29,400 29,443
Radiological services 19,205 19,205
Hospital services 7,509 1,200 6,309
Ambulance services 6,446 450 5,996
Total $623,854 $432,987 $190,867
__________
1 Services listed include only those that would be provided by the Medicare HMO at a cost savings. The
Medicare HMO would not impact other services such as skilled nursing, dental, and eye care that the Home
would continue to provide to residents through agreements with other providers.
2 Expenditures listed have been reduced by Medicare and supplemental insurance reimbursements for doctors=
services and prescription drugs.
Source: Auditor General staff analysis of medical expenditures and reimbursements for the year
ended June 30, 1996, and estimated costs for the same services if delivered by a Medicare
HMO.
Approval and Statutory
Provision Are Necessary
The Home=s management needs approval from the State Procurement Office to enable it to
select the most cost-effective means to provide medical care to its residents, and a statutory
provision to realize the greatest cost savings. Currently, a Medicare HMO appears to be the
most cost-effective means of providing most of the medical care the Home=s residents need.
To select a Medicare HMO to provide medical services to residents, and to use state monies
to pay for the services provided, the Home=s management needs to work with the State
34
Procurement Office to obtain an acceptable agreement with a Medicare HMO. In addition,
since the Home is required to furnish necessary medical care to its residents, it needs to
request a statutory provision allowing the Home to pay for only those services residents
receive from the Home=s approved providers. Residents could choose to obtain medical
services from any provider. However, this statutory provision would limit the Home to
paying for only those services rendered by its selected medical providers, thereby resulting
in the greatest cost savings to the Home. AHCCCS has a similar statutory provision that
allows for payment of medical costs only if the services are rendered by an approved
AHCCCS provider.
Recommendations
1. The Home=s management should seek approval from the State Procurement Office to
obtain an acceptable agreement with a Medicare Health Maintenance Organization to
provide medical care to the Home=s residents.
2. The Legislature should consider amending A.R.S. '41-924 to enable the Home to pay for
only those services residents receive from the Home=s selected medical service providers.
35
SUNSET FACTORS
In accordance with A.R.S. '41-2954, the Legislature should consider the following 12 factors
in determining whether the Arizona Pioneers= Home and Hospital for Disabled Miners
should be continued or terminated.
1. The objective and purpose in establishing the agency.
The Arizona Pioneers= Home (the Home) was established to provide a home for
Arizona pioneers. The 1909 Act establishing the Home provided that people who met
age and residency requirements, and had Abeen active in the development of Arizona,@
were entitled to become residents of the Home. Thus, the original intent in establishing
the Home was to provide a pioneers= home in which the needs of people who had lived
in and contributed to Arizona=s development could be met. The statutes have since
been modified and the requirement that people be involved in the State=s development
has been deleted. Additionally, the number of people who came to Arizona prior to
statehood has been decreasing, which has resulted in a shift in the Home=s population
to long-time Arizona residents, rather than actual pioneers who came to a frontier
territory.
In 1929 the State Legislature statutorily established a state Hospital for Disabled Miners
to provide care for miners who had sustained injuries while working in the mining
industry or who were financially unable to support themselves. The Hospital was to
be located adjacent to the Pioneers= Home with the Home=s Superintendent overseeing
both facilities. However, a hospital was never built. Instead, miners who meet
admittance criteria for the hospital are admitted to the Pioneers= Home, although the
Home does not provide many hospital services.
2. The effectiveness with which the agency has met its objective and purpose and
the efficiency with which it has operated.
The Arizona Pioneers= Home provides quality care for its residents at a cost
comparable to other nursing homes in Prescott. The Home=s management indicates the
Home has successfully met its objectives for over 86 years. Management feels each
resident receives kind attention and secure life and health care for the last years of their
lives. In addition, the Department of Health Services (DHS) has commended the
Pioneers= Home for the care it provides, commenting that A[s]taff interactions with the
residents were appropriate, pleasant and demonstrated sensitivity to the resident as an
individual.@ DHS also commented that many of the residents and their family members
shared positive comments about the care and quality-of-life experiences at the Home.
36
The resident population of the Pioneers= Home is largely made up of long-time
Arizona residents rather than pioneers. The changing population indicates that the
Home=s original objective to be a retirement home for Arizona pioneers has largely
been met. As the number of pioneers diminish, the original purpose for the Home
decreases.
Further, the intent of establishing a hospital for disabled miners is not being met. Since
a hospital for disabled miners was never built, the Home has admitted miners who
qualify under hospital admissions criteria. However, the Home does not provide the
services generally considered essential to a hospital, such as surgery. Because Arizona
has never established a miners= hospital, it may be liable for inappropriately using
millions of dollars in the Miner=s Hospital Endowment Fund, contrary to the terms of
the trust established by the Arizona Enabling Act (see Finding II, pages 20 through 24).
In order to improve the efficiency of the Home=s operation, the Home=s management
needs to comply with statutes concerning resident payments for care. Statutes require
the Home to include residents= incomes and the full value of residents= assets in
determining their monthly payment for care contributions. However, the Home only
includes income from such sources as Social Security and pensions, and the income
residents= assets earn. By complying with the statutes, the Home would collect more
payment for care monies to deposit into the General Fund and residents would pay as
much for their care at the Home as they would elsewhere (see Finding III, pages 26
through 31). Additionally, the Home could become more efficient by assisting qualified
residents to apply for financial assistance to help pay for their care. This, too, would
increase monies to be deposited into the General Fund (see Finding III, pages 26
through 31).
Finally, the Home=s management could also select a more efficient method of providing
medical care to its residents. Statutes require the Home to provide its residents with
necessary medical care, but current practices are not cost-effective. If the Home changes
how residents receive medical services, staff could be reallocated and annual medical
expenses reduced. For example, if medical services were provided by a Medicare
Health Maintenance Organization (HMO), the Home could save approximately
$190,000 annually (see Finding IV, pages 32 through 36).
3. The extent to which the agency has operated within the public interest.
The public served by the Arizona Pioneers= Home consists largely of long-time Arizona
residents and their families. The Home is operating within the public interest since it
satisfactorily cares for these residents, having been commended by the Department of
Health Services for the quality care it provides. However, because the Home serves a
limited number of residents and most residents are from Yavapai County, the interests
of the greater public may not be met.
37
Use of the Miners= Hospital Endowment Fund to support the Home is not in the
interest of the general public. The State could be found liable for the improper use of
an increasing amount of monies (see Finding II, pages 20 through 24).
Additionally, the State is not operating in the best interest of the Home=s residents for
two reasons. First, the Home does not comply with state law concerning payment for
resident medical expenses. Although the Home is statutorily required to provide
residents with medical care, the Home currently pays only 50 percent of medically
necessary dental and eye care expenses. The Home further limits its payments for
dental care to a maximum of $1,000 during a resident=s lifetime.
Second, the Home does not always manage resident funds in the best interest of the
residents. Statute allows residents to voluntarily deposit monies with the Home for
safekeeping. However, the Home does not allow residents to earn interest on their
guest accounts in accordance with Department of Health Services (DHS) administrative
rules. Specifically, R9-10-902(C) requires licensed nursing homes to deposit resident
funds of more than $50 into interest bearing accounts. The Pioneers= Home is not
licensed by DHS and therefore does not have to comply with this rule. However, to
ensure residents are treated equitably, the Home should follow DHS rules for
managing residents= personal funds.
4. The extent to which rules adopted by the agency are consistent with the
legislative mandate.
The Home has not adopted rules to implement its legislative mandates. The Home
needs to adopt rules regarding resident payments for care. Payment for care policies
must be established in rule to comply with A.R.S. '41-1003 and to ensure residents are
treated equitably. In addition, the Home should establish rules allowing it to attempt
to recover any monies paid toward a resident=s care from his or her estate (see Finding
III, pages 26 through 31).
5. The extent to which the agency has encouraged input from the public before
adopting its rules and the extent to which it has informed the public as to its
actions and their expected impact on the public.
Since the Home has not adopted any rules, this factor does not apply.
6. The extent to which the agency has been able to investigate and resolve
complaints that are within its jurisdiction.
38
The Home does not have regulatory authority. However, formal complaints may be
filed with other agencies such as the Department of Economic Security, Adult
Protective Services; the Governor=s Office; and the Northern Arizona Council of
Government=s Ombudsman Program. From January 1995 through July 1996, Adult
Protective Services received one complaint. Adult Protective Services investigated the
complaint, which was subsequently resolved. Additionally, the Governor=s Office
received two written complaints between January 1995 and mid-December 1996. The
Pioneers= Home responded to the Governor=s Office regarding these complaints as
directed. Finally, a representative from the Northern Arizona Council of Government=s
Ombudsman Program visits the Home weekly. The representative informs the Home=s
management of any resident complaints as well as her observations. If the complaints
and/or observations are not resolved, the representative informs the DHS.
7. The extent to which the attorney general or any other applicable agency of state
government has the authority to prosecute actions under the enabling
legislation.
This factor is not applicable to the Arizona Pioneers= Home.
8. The extent to which the agency has addressed deficiencies in its enabling
statutes which prevent it from fulfilling its statutory mandate.
Few changes have been made to agency statutes in recent years. In 1988, A.R.S. '41-941
was amended, changing the location of the Hospital for Disabled Miners from adjacent
to the Pioneers= Home to a separate facility at the Home. This change attempted to
enable the Miners= Hospital Endowment Fund to legally support the Pioneers= Home.
However, a subsequent informal Attorney General opinion concluded this statutory
wording change does not enable the Miners= Hospital Endowment Fund to support
the Home (see Finding III, pages 26 through 31).
In 1989, A.R.S. '41-923 was amended to include the requirement that at the time of
admission to the Pioneers= Home the person is ambulatory; has proper bowel and
bladder control; and is able to bathe, clothe, and feed him- or herself without
assistance.
Finally, in 1991, A.R.S. '41-942(B) was added, permitting the Governor to approve a
person for admission to the hospital for disabled miners who has not yet reached 60
years of age. Legislation has been introduced to require miners to pay for the cost of
their care to the extent they are financially able to do so.
39
9. The extent to which changes are necessary in the laws of the agency to
adequately comply with the factors listed in the Sunset Law.
The Legislature should consider the following statutory and other changes related to
the Arizona Pioneers= Home and Hospital for Disabled Miners:
n Petition the U.S. Congress to change the Enabling Act to allow the Miners= Hospital
Endowment Fund to be used for purposes decided by the Legislature.
n Add a statutory provision to enable the Pioneers= Home to pay for only those
medical services residents receive from the Home=s selected medical providers.
10. The extent to which the termination of the agency would significantly harm the
public health, safety or welfare.
Termination of the Arizona Pioneers= Home would not significantly harm the public
health, safety, or welfare since services provided by the Home are available from
counties or private health care providers. The opening of the Arizona Pioneers= Home
in 1911 enabled the State to care for those pioneers who contributed to the State=s
development. Since then, federal law has enabled elderly people to receive medical
care through Medicare. In addition the State offers health care services to Arizona
seniors who cannot afford to pay for necessary care. The Arizona Long Term Care
System under AHCCCS was established to provide health care services to eligible
elderly persons. Additionally, there is an established network of nursing homes
throughout the State. Finally, there are alternative settings available to the elderly such
as day care centers, assisted living facilities, and group homes.
Because of concerns with the building and residents= safety, the Home=s financial
situation, and the growing number of residents requiring increased care, the
Legislature should establish a special committee to develop a recommendation
regarding the Home=s future. This audit presents three options for the committee=s
consideration: continuing the Arizona Pioneers= Home; reducing the scope of its
operations; or phasing it out (see Finding I, pages 9 through 19).
11. The extent to which the level of regulation exercised by the agency is appropriate
and whether less or more stringent levels of regulation would be appropriate.
Since the Arizona Pioneers= Home is not a regulatory body, this factor does not apply.
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12. The extent to which the agency has used private contractors in the performance
of its duties and how effective use of private contractors could be accomplished.
According to the Home=s management, the Home uses private contractors for medical
services including medical doctors, physical therapy, respiratory therapy, pharmacy
services, and dietary and nutrition consulting. The Home also contracts for laundry
services and computer services. In addition, it uses private contractors for various
maintenance services such as pest control, vehicle rental/leasing, office equipment, and
elevator inspection and service.
At this time, the Home has no further plans to expand private, outside services.
However, the Home should identify the most cost-effective means by which most
medical services can be provided, which currently appears to be a Medicare HMO (see
Finding IV, pages 32 through 36).
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RESPONSE & COMMENTS TO SUNSET AUDIT REVIEW DRAFT
SUMMARY
Finding I - Critical Decisions Needed to Determine the Home=s Future
The Pioneers= Home building is 86 years old and showing signs of age. Per Thomas Knapp,
Registered Architect and President of the architectural firm TRK, the term Adisrepair@ is inappropriate
as applied to the Pioneers= Home. The Home is not in Adisrepair@ but is well maintained. However,
it is in non-compliance with various codes.
Funds have been expended to support the Arizona Pioneers= Home and Miners= Hospital as
appropriated by the legislature. The State Trust sources have been used in preference to the General
Fund. This practice will continue unless the legislature changes the manner in which it appropriates.
We agree operating costs have increased due to increased medical technology and longevity of
residents.
There are several options open to the legislature. We feel the most viable option is to refurbish and
continue the Pioneers= Home. Both the mission of the Home and the building itself are of great value
and should be preserved.
Finding II - State Continues to Expend Monies in Miners= Hospital Endowment Fund
It has been the decision of the legislative branch to appropriate funds from the Miners Fund. The
executive branch has approved the budget and there has not been a challenge in the judicial branch.
Therefore, the use of monies from the Miners Fund is not in violation of any current laws.
Finding III - The Home Could Recover Additional Costs by Complying with Statutes and Improving
Practices
The Home has complied with statutes as interpreted in previous decades by administration. The Home
is strengthening policies and implementing the process of writing administrative rules to clarify areas
in question. After considering the intent of the legislation creating payments for care and the
competency of the residents at the time of admission, the payment for care policy has not been
rewritten to state that all assets must be spent, but the policy has been tightened up so that there is
consistency and payments for care policies will be applied as if their properties were income
producing, whether or not that is a fact.
Finding IV - The Home Could Reduce Medical Expenses if Residents Join a Medicare HMO
The Home could reduce medical expenses if residents join a Medicare HMO; however this would
require statutory change and that change is not forthcoming in the 1997 legislative session. Unless
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this legislation passes in a future session, the Home will be required to continue providing medical
care in a manner similar to what has been done historically.
INTRODUCTION & BACKGROUND
1986 Report and Follow-up
# Need for the Pioneers= Home is changing -- Page 4 states that the Home had an A...original
purpose of caring for residents who were active in Arizona=s early development.@ The Home
continues to serve the purpose of caring for individuals that have helped in the development
of the State of Arizona in one way or another. Additionally, nowhere in statutes does it say
residents cannot primarily come from one county or another. The follow-up finding makes
an editorial comment regarding the many residents of the Home have from Yavapai County.
As noted in the 1986 Sunset Audit Response, when one considered the county of residence
to which individuals came when he/she originally entered Arizona and in which he is more
likely to expend his productive years, the percentages change dramatically. Many of the
residents, both in Yavapai County and in the Home have come to that county for retirement.
Even in the year 1986, Yavapai County had the highest percentage (22.5%) of individuals
who were of retirement age. Today the percentage of retirees in Yavapai County is estimated
at 35% by the Prescott Chamber of Commerce. It is doubtful that any other county in the state
has such a high percentage.
# The Pioneers= Home has inappropriately expended money from the Miners= Hospital
Endowment fund -- The Home was instructed by the legislature to support the Home
through the use of these funds. Indeed, appropriations are now being made from the Miners
Fund and monies from other funding sources have been decreased in recent years.
# The Pioneers= home needs to improve its payment for care determinations -- This
concern has been addressed by the Home=s new administration. The specifics are addressed
in the text of the current response.
FINDING I - CRITICAL DECISIONS NEEDED TO DETERMINE THE HOME=S FUTURE
Millions of Dollars Needed to Correct Building Hazards
The Arizona Department of Administration requested an architectural evaluation of the Home which
was completed July 1, 1996. This report is cited in Table 2 by the Auditor General. This report is
rather lengthy but is available upon request to legislators or other review bodies. It was prepared
specifically to:
1. Provide a general overview of the existing condition of the facility.
2. Advise the State of any observed condition(s) which do not comply with
current building codes.
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3. Advise the State of any observed condition(s) which do not comply with
current Department of Health Services licensing requirements.
4. Advise the State of any observed condition(s) which do not comply with
the Americans with Disabilities Act Accessibility Guidelines.
5. Recommend to the State suggested changes and physical improvements.
6. Provide order of magnitude cost estimates for all recommended changes
or improvements. (Italics added by the Home)
< All of the recommended improvements or repairs are fully justified and if completed
would greatly increase the appearance and overall well-being of the facility. We have
met with Kent Bosworth, ADOA General Services Division Assistant Director.
Subsequent to this discussion we will be including in our capital budget the
recommended monies to bring the building into compliance with all appropriate codes.
The Home is a landmark building, owned by the State of Arizona, and should be
seriously considered for preservation as an historic building and brought into
compliance with all life and safety codes for the protection of it=s residents. However,
we would like to point out that we believe that some estimates cited in Table 2 by
TRK are overstated. For example, in Section 2, page 6, the recommendation is to
replace awnings at the estimated cost of $7,350. The Home=s staff replaced the
awnings in Fall 1996, at a cost of $1,100.
< Additional references will be made to the TRK report throughout our response to
the auditors= comments regarding monies needed to correct building hazards.
< The TRK report included comments made by DOA Risk Management. A...overall this
facility and agency are administered and managed superbly considering the age of the
facility and the unique character of their operational mission.... innovation,
professionalism, and practicality seem to be the main reasons this agency survives so
well... overall this agency presents a lower risk to the State, barring any unforeseen
catastrophic events, than any agency that has been assessed up to this point. The
lasting image is one of efficiency and quality service to their clients and this agency
lives up to it=s name as a >Home=.@ (Risk Management Report dated 8/20/90)
< The Executive Summary in the TRK Report, Section 1, pages 2-3, included the
following comments.
General overview
For a facility of this type and age, the building is in good condition. We attribute this to the
personal interest and care of the Home=s administration, staff and residents.
General Recommendations
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Preservation : The Home is a significant part of Arizona History. Whether
it continues to serve the State in it=s present capacity or in some
future capacity preservation of the Home should be top
priority.
Continued Use: AThe facility falls short of meeting today=s regulatory
requirements in many regards. But the personal interest and
care of the Home=s administration and staff appears to mitigate
these issues such that the residents are probably not aware of
the facility=s shortcomings. Whether or not this compensates
for not meeting regulatory requirements is beyond our
expertise. However, if the State changed the eligibility criteria
for residents, regulatory requirements would be reduced... Due
to the natural aging process, the Home has many residents who
are not ambulatory, do not have bowel and bladder control,
cannot bathe, clothe or feed themselves without assistance and
should be in a skilled nursing care facility. The cost to bring
this facility into substantial compliance with the requirements
for a skilled nursing care facility will be great (we don=t think
it=s practical to bring the facility into full compliance).
(TRK=s words) An alternative may be to change resident=s
eligibility requirements and convert this facility into an
assisted living center.@ (Underline by TRK)
# The Home concurs with the TRK opinion that it is not practical to bring the facility into full
compliance with licensure requirements. By making an executive decision to address only
those building related concerns that are health and safety issues could reduce the cost
dramatically from the all inclusive figure of seven million. The stakeholders recommended
by the TRK report should have input into this process.
# Fire Safety Problems - We concur with some of these problems and find them of great
concern also.
< We have requested the funds to upgrade the sprinkler system which has been deemed
inadequate.
< Recently over 75 smoke detectors were installed in resident rooms. Therefore, we are
currently in compliance with this recommendation.
< The cooling system was put in according to plans drawn and administered by ADOA.
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We have requested a review from that Department and from the Fire Marshall to
determine what is necessary to have the evaporative coolers automatically shut down
when the fire alarm system is activated. It is unacceptable to have smoke spread
throughout the building. We appreciate receiving the information regarding this risk.
# Insufficient Exiting System and Inadequate Resident Doors - We will request appropriated
funds for investigation and correction of these problems.
Fire drills are currently scheduled on a regular basis and are held according to the recommendations
of DHS. This finding has been corrected.
Building code, ADA, and Other Problems
The Registered Architect for TRK, Thomas Knapp, who was the project manager of the Facility
Evaluation Report states that the use of the term Adisrepair@ is inappropriate as applied to the
Pioneers= Home. The Home is not in Adisrepair@ but is well maintained. It is however in non-compliance
with various codes.
# Indeed, according to today=s building codes, the Home does not meet the required standards.
The Home did, however meet the codes of yesteryear and has met the test of time. It is the
belief of the administration that most of the standards are met, however, on the second floor,
where most of our business is conducted. There has not been funding provided to facilitate
the Home making a priority of the high dollar project to become compliant with the building
requirements of ADA.
# Licensing Issues - We do not disagree that there are deficiencies that would prevent the
Home from being licensed under DHS. We are concerned about fire and safety codes but
not about codes that do not directly impact quality of life for the residents. (i.e., some
residents bathing facilities are not of sufficient size. This is indeed a licensure issue, however
the staff at that Home is far more concerned with frequency of bathing for each resident
rather than the size of the facility in which they are bathed . Also, the auditors mentioned
residents room exceed maximum per room occupancy. The Home does have a mens and a
womens ward for total care residents. In spite of the fact that this is not the current trend in
health care facilities, we have found that it provides much greater stimulation, closer
observation and continual hands on care for residents who need it. And we find that it requires
less staff to provide quality care to the most dependent residents at the Home.)
External Structure Problems
# These are general maintenance problems that have been addressed through building renewal
requests to the legislature for the past several years. Adequate funds have not been
forthcoming but we will continue to request appropriations for the highest priority items.
The Pioneers= Home received a State Historical Preservation Grant in 1996, which is making
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an estimate on external necessary repairs. The report is in it=s final stages of preparation.
The structure seems to be in good repair, however the deteriorating paint, gutters, roof and
ramps will all be addressed in budget requests for normal maintenance of the building.
Depending upon the availability of funds and the extensiveness of the work, most of the
needed repairs can be done at decreased cost. The General Structural evaluation provided by
Gervasio & Associates, Inc., on July 10, 1996, shows an itemized ARough Cost Estimate@of
$120,000, as follows:
Building Area Subtotal Cost
Basement $ 0
First Floor 5,450
Second Floor 6,500
Third Floor 13,000
Roof 63,000
Exterior Ramps 21,000
Balcony & Bridge Walkways 11,250
________
TOTAL $ 120,350
Plumbing, Heating, Emergency Electrical, and Other Problems
The TRK report cited by the auditors recommends the formation of a committee of stakeholders to
develop a consensus on a plan that the legislature and state building department can follow to bring
the building up to higher standards of life safety and health concerns. We strongly support this
recommendation and will be preparing budgetary plans and priorities as we have previously discussed.
# We agree that the emergency electrical system must be upgraded as soon as funds are
available. A report specifying costs and recommendations is available upon request.
# The heating system was addressed in the report from Lowry-Sorensen-Willcoxson Engineers
Inc., dated May 31, 1996, Job #96102.00, as follows:
Retain present boilers
Provide automation control, re-work & re-test $26,000
Replace condensate pump 8,000
Replace horizontal condensate piping and insulate 48,000
Re-insulate all steam piping 46,000
Replace steam sectioning valves 6,000
Replace radiator and steam main traps 29,000
Provide radiator temperature control valves 32,200
Provide water softener 7,000
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Refurbish and relocate Level 3 steam to hot water converter 8,000
Provide safety shields/guards over 128 radiators 25,600
Remove Kewanee boiler and fuel oil tank 30,000
(Assuming no fuel contamination of soil)
Remove old hot water storage tank and piping 10,000
Allowance for new radiators in corridors if heating study
indicates need (10 units) 10,000
Toilet make-up air and exhaust system 103,500
Contingency 16.8% 67,000
Design and documentation preparation 56,000
TOTAL $512,300
By prioritizing and planning some of the projects recommended in the TRK report could be
done in phases and could be done without addressing every issue that does not effect quality
of life and safety issues for the residents.
# Upgrading could be done to the level recommended by the auditors, which is referred to in
Table 2, at the cost of $1,566,600, or at the more minimal expenditure as cited above, or
somewhere in between, depending on the funding available.
# Flooring, carpeting, handrails are being addressed as the needs arise and are being paid for
out of current monies available. Kitchen cabinets and countertops were replaced in February
1997.
# Hazardous materials must be removed, as per Federal law, when remodeling takes place.
Without major remodeling the dollar figure for removal of hazardous material is grossly
overstated. If the work is done, that request will be included in our capital budget request for
bringing the building into compliance with code. Removal of hazardous materials would be
included in all plans to upgrade the building. This is already clearly understood with the
administration of the Home and the General Services Division of the Department of
Administration, and would follow Federal guidelines.
# We concur that repairs must be made to insure safety. The approach in the past has been to
work with DOA when we have had unsafe situations arise. In recent years a wing of the
Pioneers= Home was completely remodeled with total removal of asbestos and lead paint with
the full cooperation and funding of the DOA Building Department. They continue to support
the Pioneers= Home as problem areas are identified as either life threatening or hazardous to
the health and safety of our residents.
Future Sources of Funding Uncertain
# As long as the legislature continues to appropriate from the Miners Fund it is legally available
to the Home=s administration for the support of the Home. The Attorney General has written
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opinions stating that this money is being used inappropriately, however, that has never been
challenged in court and the legislative branch of the government has continued to appropriate
from this fund. Therefore, use of the monies is by design, not by default. It is the intent to use
these monies rather than the General Fund because no other agency in the State can use this
money. When these sources are depleted, appropriations from the General Fund will have to
be increased.
# The Enabling Act, Section 25, states that the Pioneers= Home has been designated as the
recipient of fifty percent of the State Charitable Fund. Without legislative change, these funds
cannot be transferred and can only be used by the Home. Using this funding source ahead of
the General Fund has been a prudent decision by previous legislators and it has been an
intentional choice. As the available funds are spent, the source for appropriations will again
be shifted to the General Fund.
Increasing Number of Residents Needing Skilled Care is Costly
# We concur that acuity has increased, as has the age of the residents. This has increased the
cost of providing care. However, A.R.S. 41.924 states, A...the Superintendent shall see that
residents are furnished with the necessary medical treatment...@ It is currently the statutory
requirement that we continue to provide the necessities of life and care, regardless of the
resident=s level of care throughout their stay in the Home. We are currently investigating
options to increase Medicare and insurance reimbursement. Some of