Automobile salesman William Hamachek leans forward at his desk and talks gently and lovingly about his wife, who is at the county-owned Park Lawn Nursing Home, where she suffers from Alzheimer`s Disease.
”In my opinion, the care there is of high quality,” he said. ”My wife is neat and clean. I certainly wouldn`t want that to change.”
But change is coming, and Hamachek and others with close relatives at Park Lawn are getting anxious. Citing growing costs and shrinking Medicaid reimbursements, the Manitowoc County Board is going to lease Park Lawn to a private, for-profit company.
The move has divided the community between those who see no other choice but to lease the 99-bed facility and those who fear that turning it over to a private operator will bring deteriorating care for patients, lack of accountability and dismissal of many local employees.
Three years ago, the Park Lawn home reported a surplus of $108,000 after shaking off a string of deficits, but tighter Medicaid reimbursements plus rising costs reduced that surplus to $6,000 last year. The county, though, has done no detailed projections of future costs–much to the dismay of opponents of private care.
Manitowoc County`s decision over a relatively small nursing home illustrates the conflict that arises when the privatization of government work reaches into the lives of ordinary people at the local level, forcing them to make a basic choice between retaining a high-cost, high-quality public facility or keeping tax rates at current levels.
It is a battle over the higher labor costs at a publicly owned facility and, more fundamentally, a conflict over the role of government that is being played out in thousands of ways across the U.S.
Despite the controversy it stirs up, privatization is spreading at the state and local levels. Its primary form is contracting for goods and services, including hospitals, jails and prisons, garbage collection, security and even fire protection.
”It is definitely growing in importance,” said Joan Bannon, assistant executive director of the U.S. Conference of Mayors. ”One reason is that a lot of federal programs have encouraged privatization. Urban development action grants, for example, require cities and the private sector to work together in order to obtain the grants.”
In most cases, however, it is the lack of money from the federal government that is privatization`s driving force. Cutbacks in revenue sharing and various grant programs have placed a greater burden on states and localities, requiring them to look for other means to keep taxes from rising. Now, about 35 percent of local governments contract with private firms for residential garbage collection and 42 percent contract for operation and maintenance of bus systems, according to the National Center for Policy Analysis, of Dallas.
E.S. Savas, a professor of management at the City University of New York and a strong advocate of hiring private contractors for public services, said privatization is occurring in 181 different types of services offered by local governments–58 of them major services. He estimates that the rate of local government contracting has more than tripled in the last decade.
The supporters argue that, almost without exception, contracting results in lower costs for government. But opponents, chiefly public-employee unions, cite many hidden costs. Cities find themselves having to pay for monitoring the contractors and making up the difference when a contractor performs poorly, they say.
The growing use of private contracting, however, indicates that state and local governments have found it a useful way to hold down costs despite problems. Phoenix uses contracting extensively, and on a major landfill contract it estimated it is saving $8.5 million over five years.
Public employees are deeply concerned about the trend. They fear they are becoming an endangered species as more state and local governments turn to private contractors. The largest public employee union, the American Federation of State, County and Municipal Employees (AFSCME), has launched a major campaign against the entire practice, but its success has been limited. Perhaps the union`s biggest victory occurred recently in Tennessee when a state Senate committee rejected by one vote a proposal to lease two state prisons to a private company. In Arizona, Gov. Bruce Babbitt vetoed a bill that would have permitted prison leasing to the private sector, saying it was too broad.
Although privatization sounds new, there is nothing novel about it. In the last century and early in the 1900s, state and local governments relied on private contractors to perform many of their services. Scandal and corruption accompanied many of these contracts, and the public felt it was not getting its money`s worth.
As a result, many state and local governments began expanding the size of their work force as well as the amount of services directly provided by its workers. Reliance on contracts diminished in the 1920s and 1930s. Only in the last decade, when local budgets began to be pinched and many companies emerged with an eye on contracts, did privatization re-emerge as a force.
Highly publicized scandals over contracts in New York, Chicago and Washington, D.C., have given unions ammunition against the practice. ”It`s become the new way for public employers to practice patronage,” said Gerald McEntee, president of AFSCME.
The county nursing homes in Manitowoc County were built in 1959, replacing a poorhouse system, said Irving Nies, who was chairman of the board at the time. ”We did not build these to make money,” Nies said. ”We built it to help the people.”
Nies blames the county for not keeping costs under control and for letting in the union to represent the workers. He said a good manager could solve the problems of the nursing home system without leasing it. Somehow, he said, the original public purpose of building these homes–helping the poor and the difficult-to-care-for patient–has been lost in the debate over efficiency and wages.
The battle in Manitowoc indicates that privatization at the state and local level is fraught with complexities and adjustments–and that it comes at a cost. And this nursing home dispute is not confined to one small city. The union is fighting the leasing or outright sale of a network of county-owned nursing homes all over Wisconsin, with Manitowoc the chief battleground for the moment.
To try to preserve their jobs and keep the nursing home publicly operated, employees offered to take a 10 percent wage cut.
But that did not matter. The board voted 18-13 last week to lease the facility. Now, said a union official, the whole thing will wind up in the courts, which indicates the seriousness of the battle.
Recently Chippewa County voted to sell its county nursing home outright. Some insiders here say that both the Park Lawn and Health Care Center, a larger nursing home, eventually will be sold as well. One county official said that whatever Manitowoc County does could start a domino effect at county-owned nursing homes across the state.
The real issue is cost. Although the union hotly disputes it, county officials said that nursing home operations are headed deeply into the red in future years. The Health Care Center, which is not up for lease, already has a large deficit.
”Do we wait until a crisis, or act now?” asked Robert F. Ziegelbauer, the county`s youthful chief financial officer and a graduate of the Wharton School of Finance. ”Property taxes are really under pressure. A 10 percent wage cut may not be enough.”
Ziegelbauer called Park Lawn ”marginally unprofitable at the moment. It has experienced years of small profit and years of small losses. Our costs keep growing faster than the Medicaid budget, so that the future looks very unprofitable.”
So, he said, turning it over to a private operator, Marlys Griffiths of Strum, Wis., will mean that the county will earn money back on its investment, rather than go deeply into the hole.
Neither Ziegelbauer nor the county board chairman, Donald Vogt, is worried about a decline in the quality of care. Vogt said Wisconsin has one of the toughest nursing home regulation laws in the country and that should be sufficient.
But Thomas Harter, administrator of both Park Lawn and the Health Care Center, disagreed. He said the state regulations establish minimum standards for patient care that fall below those at Park Lawn, particularly in the number of hours spent by a staff member with a patient per day.
He said he checked out the Griffiths operation thoroughly when it bid on the county`s contract and added that, in his opinion, it operated at a minimum level. ”I`ve got a lot of concern,” he said. Harter said he was especially concerned about reports of violations filed with the state of Wisconsin and about the possibility of staff cuts at Park Lawn.
Griffiths, contacted after the county board vote, said she runs high-quality facilities in five other towns and does not intend to let quality slip at Manitowoc. She said most of the employees at Park Lawn will be rehired but that their pay rates obviously will be lower because of state reimbursement formulas. To be profitable, she said, ”you have to run a really tight ship.” The staff will be cut by no more than 1 or 2 percent, she said. As for the violations at other nursing homes, she said most of them involved differences of opinion with the state over whether to move elderly patients when the state began a push to convert nursing homes into skilled-care facilities.
Griffiths, a former teacher, said she realizes she has a job to do in convincing Manitowoc of her sincerity in maintaining quality. ”I see their concerns as legitimate concerns,” she said.
Manitowoc Mayor Thomas Dufeck said he worries about Park Lawn going private because the contractor will want to make a profit that will force cuts in the labor force. ”I`ve been around long enough to know that when this happens in a nursing home, that wet bed isn`t going to be changed quite as often,” he said.
Vogt said the county board received assurances from contractor Griffiths on continuation of quality of care and added that she had promised to give preferential treatment to current employees when hiring.
Union members such as Linda Dueno and Sherry Levendusky said there is no doubt in their minds that the quality of care will suffer if Park Lawn is turned over to a private firm. As a publicly owned nursing home, Park Lawn accepts many hard-to-care-for patients that private homes would not consider, Dueno said. Eighty percent of them are Medicaid patients. That may change in the switchover, she said.
Manitowoc and other counties have tried to get the legislature to change its reimbursement formulas for Medicaid to pump a higher percentage of funds into nursing homes that–because they are publicly owned–accept patients who require more intensive care. When that appeal failed, the move toward privatization began in earnest.
Vogt said the county first got the notion of leasing Park Lawn a few years ago when a Catholic nursing home proposed to take it over. The idea quickly was rebuffed and then dropped, but the issue came up again when the federal government began cutting revenue-sharing funds and the state tightened up on Medicaid, partly because of initial tightening from Washington.
From all appearances, Park Lawn is a clean, well-run facility. ”I`m hoping that if it gets turned over to someone else, they get good care,” said Kenneth Haupt, whose 93-year-old mother resides there. ”Who knows what`s coming on?”
Hamachek said he is anxious about the future, but feels better because an adjacent facility, Shady Lane Nursing Home, is county-owned but has been leased for years.
Harter said there is no comparison between the two because Shady Lane is an intermediate-care facility that accepts only patients who are better equipped to take care of themselves and who require less attention.
”We have a lot of patients here who know what`s going on,” nurse`s aide Mary Reno told Vogt on a tour of Park Lawn. ”They talk about (the leasing). They don`t know what`s going to happen. It upsets them.”
At bottom, the main issue appears to be difference in wages and benefits at the county-owned facility and the private nursing homes around the area. Employee pay averages $6.70 an hour at Park Lawn, but at private facilities it is much less, Dueno said. The county also picks up health insurance costs. Officials said the county`s labor costs are $300,000 higher than they would be in a comparable private facility.
”When our salaries break away from the private sector in a significant way, we`re begging to be taken over,” Vogt said. ”There is nothing that government does that can`t be taken over by the private sector.”
Tuesday: How government-issued vouchers have become a tool for privatization.
