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Correspondence: Address correspondence to Charlene Harrington, PhD, Department of Social & Behavioral Sciences, University of California, 3333 California Street, Suite 455, San Francisco, CA 94118. E-mail: Charlene.harrington{at}ucsf.edu
| Abstract |
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Key Words: Nursing home civil money penalties Nursing home fines Nursing home enforcement Nursing home quality improvement Nursing home information
State survey agencies may recommend federal penalties and fines and other sanctions to CMS for Medicare-only certified facilities and for Medicare and Medicaid dually certified facilities, but CMS makes the final determination of action against a nursing home and issues federal penalties and fines and other sanctions (CMS, 2004). The federal government retains federal penalty funds collected from Medicare-only certified facilities, whereas states split penalty funds collected from Medicare and Medicaid dually certified facilities based on the relative proportions of Medicare and Medicaid residents in the facility (CMS, 2004). For Medicaid-only certified nursing homes, states may issue and collect federal penalties directly. States have complete discretion to issue, collect, and use penalties and fines for violations of state regulations. Funds from penalties and fines are resources for fiscally constrained states to improve the quality of nursing home care (CMS, 2004). We identified no studies in the literature that examined states' funds from penalties and fines and how states were using these funds.
This descriptive study attempts to address this gap in the literature by describing what funds states have collected from penalties and fines and how states use these funds. First, we present the amount of federal and state funds collected from penalties and fines based on data from a survey of state licensing and certification officials reported for 2004. Second, we present the state fund balances from penalties and fines for 2005 and the total state allocations of fund penalties and fines between 1999 and 2005 from the same survey of state officials. Third, we examine the availability of public information about deficiencies and penalties and fines, state funds from penalties and fines, and state use of funds. Finally, we analyze information from five stakeholder groups in 6 selected states to evaluate funded projects and describe the process of allocating funds. Information about the amount of funds collected and the availability and use of funds from penalties and fines is of interest to policy makers and stakeholder groups for shaping future procedures and policies regarding penalties and fines.
Regulatory Requirements
Regulatory policies shape the area of nursing home enforcement. Brown (1992) described a typology of four types of health care regulation as centralized versus decentralized and budgetary versus behavioral. Using Brown's classification, nursing home quality requirements, such as using intermediate sanctions including penalties and fines, are decentralized behavioral regulations designed to ensure quality of care and quality of life. Brown stated that decentralized regulations give the appearance that the federal government is doing something positive with democratic decision-making processes and deflect political conflicts away from the federal government. Behavioral regulations do not threaten the economic interests of the system as do budgetary regulations. Kagan (1994) argued that regulatory variability is a function of agency policies and styles along a continuum from active and responsive to inactive and unresponsive policies and legalistic and sanction-oriented to conciliatory and accommodative approaches. Thus, variation in state regulation of quality is inherent in the structure and process.
Since the Medicare and Medicaid program established nursing home payments in 1965, nursing home regulation has been a joint federal and state responsibility that has been decentralized to states for program administration. All states have established state licensing requirements and have contracts with the federal CMS to certify that nursing homes meet federal standards. The federal government establishes the federal regulations for nursing homes, sets the state survey and certification procedures, funds state survey and certification programs, and provides central and regional oversight over state survey, certification, and enforcement programs (GAO, 2003; Office of the Inspector General [OIG], 2005a, 2005b).
States are largely responsible for carrying out the survey, certification, and enforcement activities using elaborate guidelines for issuing deficiencies and penalties for violations of federal regulations (OIG, 2005a, 2005b). Federal penalties and fines have no notice requirement and payments are due within 15 days unless a payment schedule is negotiated or the nursing home files an appeal (OIG, 2005a). Most nursing homes that receive fines use the administrative appeal process to delay payments of federal penalties and fines up to 2 years or more.
Studies of state enforcement activities have found wide variations in the use of deficiencies, penalties and fines, and intermediate sanctions across states (Harrington & Carrrillo, 1999; Harrington, Carrillo, & Mercado-Scott, 2005; Harrington, Mullan, & Carrillo, 2004; Hawes, 2002; OIG, 1999, 2005b; Walshe & Harrington, 2002; Wunderlich & Kohler, 2001). None of these studies, however, examined state use of funds from penalties and fines.
The OIG (2005a) conducted a study of federal penalties and fines that showed that $81.7 million in federal penalties were imposed during 2000 and 2001 but only 42% of penalties were paid by December 2002. Of the federal penalties and fines issued, 70% were substantially reduced before payment because of systematic reductions (35% reduction for waiving the right of appeal), appeals, settlements, bankruptcies, and other factors. Another study by the GAO (2003) documented $38.8 million in federal penalties implemented between 2000 and 2002 and the variation in state use of federal penalties and intermediate sanctions. These reports recommended that CMS provide written guidelines to CMS staff and states regarding procedures for issuing and collecting federal penalties and fines, as well as that CMS streamline the processing of federal penalties and fines (GAO, 2003; OIG, 2005a, 2005b). This study does not address whether the imposition of penalties and fines is an effective enforcement tool; rather, it examines the extent to which states collect and use penalties and fines.
Uses of Funds From Penalties and Fines
Although CMS has detailed requirements for states regarding nursing home surveys and enforcement activities, CMS has only given limited guidance to states on the use of federal funds from penalties and fines and no guidance on procedures for the allocation of funds. Federal regulations require that federal penalty funds be used for the benefit of nursing home residents. This may include the protection of the health or property of nursing home residents, including paying for state costs of relocating residents to other facilities, maintaining the operation of a facility pending correction of deficiencies or closure, or reimbursing residents for personal funds lost (CMS, memorandum, August 8, 2002).
States may also use funds for special nursing home improvement projects, training, or other projects that directly benefit residents, including funding ombudsman services. The federal government has given states wide flexibility in using federal penalty funds and has encouraged states to be more creative in the use of penalty funds, although the federal government has stated that it is inappropriate for funds to be used for a loan to a deficient facility or to help the facility correct its noncompliance (CMS, memorandum, August 8, 2002). This is consistent with a decentralized behavioral regulatory approach. In the situation where states are given maximum flexibility in their policies and procedures for the use of funds from penalties and fines, one can expect that there would be wide variations in how the funds are used.
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Part I
We used a two-step process for the collection of data from state licensing and certification officials: (a) a 1-page written questionnaire to obtain state statistics on federal and state penalties and fines for 2004, and (b) a 20-min follow-up structured telephone survey of state licensing and certification program officials in all 50 states and the District of Columbia. We sent a letter and made a telephone call to ask for participation. Although we expected that we would need to make three to five calls to each state in order to identify the appropriate contacts, schedule appointments, and collect data, we needed approximately 10 contacts per state. During and after each telephone interview of state officials, we collected all responses and typed them out for a complete record of each interview. We entered the quantitative and qualitative data into Excel spreadsheets (Microsoft Corporation, Redmond, WA). We reviewed the data collected for accuracy and completeness and made follow-up telephone calls to clarify information or to obtain additional data as needed. Two study investigators conducted the coding and reconciled all discrepancies.
The statistical survey of the states received a response rate of 65% (33 states) in spite of many letters, e-mails, and telephone contacts with state officials; 32 of the 33 state officials participated in the telephone interviews. States that refused to participate gave a number of reasons for refusal. Some state officials cited their heavy workload requirements and the limited staff available, whereas other states said that they had participated in too many studies lately and CMS did not require states to participate. Two states declined to participate, stating that they were opposed to the goals of the study.
We used Freedom of Information Act requests to obtain some basic information on the number and amount of penalties and fines and the fund balances for penalties and fines for those states that did not respond to the survey. We sent Freedom of Information Act requests to 25 states, and 20 states responded to most questions.
Part II
The interviews of state officials included specific questions about what information was made available to the public. In addition to this source, we searched Web sites for each state licensing and certification agency and state government for nursing home data. We contacted state legislative reference libraries to obtain data on state statutes related to penalties and fines, the use of state penalties and fines, as well as state fund balances during 2005. In December 2005, we conducted another comprehensive search of state Web sites to determine whether each state had publicized information about (a) nursing homes in general, (b) nursing home reports on individual facilities, (c) nursing home reports on deficiencies for individual facilities (some states report data on facilities but not necessarily deficiency data), (d) nursing home reports on penalties and fines for individual facilities, (e) the number and amount of funds collected by the state from penalties and fines, or (f) the use of funds from penalties and fines by the state.
Part III
We selected 6 states (KS, MA, MD, MI, NJ, NC) for a detailed analysis of penalty and fine special fund uses. The selection of these 6 was a convenience sample of the first state officials interviewed who reported using funds from penalties and fines for special projects and who were willing to provide detailed data about the use of these funds. Once we had selected the 6 states, we identified stakeholders in each state and their contact information using Internet searches and the National Citizens Coalition for Nursing Home Reform database of state provider organizations, ombudsmen, and consumer advocacy organizations. We identified the following four categories of stakeholder groups for interviews: (a) the state ombudsmen, (b) the director of the state chapter of the American Health Care Association, (c) the director of the state chapter of the American Association of Homes and Services for the Aging, and (d) the director of nursing home consumer advocacy organization(s). In addition, we conducted interviews of the state directors of licensure and certification agencies.
Overall, 28 stakeholders out of 31 contacted agreed to participate (90% response rate) in the study. Among state ombudsmen, the participation rate was 83% (5 of 6, except for NJ). The participation rate of directors of state chapters of the American Health Care Association was 100% (6 of 6). The participation rate of directors of state chapters of American Association of Homes and Services for the Aging was 83% (5 of 6; except for NC). The consumer advocate organizations' participation rate was 100% (7 of 7; no advocacy organization was identified in NJ), whereas two advocacy organizations were available in 2 states (MA and MI). The state survey and certification agency participation rate was 83% (5 of 6, except for MD). We asked survey respondents to (a) evaluate each project funded in their state in terms of its quality and impact on resident care, (b) describe any projects that were omitted from the list of projects, (c) describe the process of selecting projects for funding, (d) make suggestions for the allocation process, (e) provide an overall perspective on how the state used funds from penalties and fines, and (f) propose future uses for the funds from penalties and fines.
Analysis of Data
We compiled and completed descriptive analyses of the data by state. We calculated frequencies by state on the following variables: the existence of fund accounts from penalties and fines, fund balances from penalties and fines, and fund allocations by types of grantees. We categorized and coded the state allocation of funds from penalties and fines and coded into four groups: (a) for licensing and certification activities, including temporary management and relocation of residents, consultation with and technical assistance to nursing homes, and other management activities; (b) for providers, for example for special quality improvement projects; (c) for consumer advocates and ombudsmen for quality improvement projects; and (d) for other uses, such as training and research studies. We classified state consultation and technical assistance projects as survey and certification projects because state licensing and certification agencies used the funds themselves to carry out their activities. Categorization of funds by types of expenditures was difficult because of the limited details provided by some states, but where there were doubts, we used the "other" category.
| Results |
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Some states used funds from penalties and fines survey and certification programs to provide consultation or technical assistance to providers (see Table 2). For example, Indiana ($2 million), Maryland ($308,131), Ohio ($2.3 million), and Wisconsin ($94,922) spent funds on technical assistance. Other states used the funds from penalties and fines for temporary management, receiverships, and corrective actions. These included California ($6 million, including $4 million on one nursing home chain), Colorado ($666,772), Illinois ($430,000), Michigan ($5.1 million), Pennsylvania ($708,051), and Wisconsin ($160,520).
Of the 32 states that reported, 24 used the funds from penalties and fines for projects to improve nursing home quality (Table 2). Of these states, 19 states reported using about $5.6 million (20% of expenditures) for provider projects, 6 states spent $1.3 million (5% of expenditures) for advocacy projects, and 12 states spent $2.7 million (10% of expenditures) for other projects such as conferences and training. The most common type of provider project funded was culture change activities, such as Eden Alternative, Green House, Pioneer Network, and Wellspring projects. Training projects for direct care staff included programs in 7 states on restraint use and pressure ulcer prevention (DE, NJ), Alzheimer's and dementia care (FL, IN, KS), safety and psychosocial issues (KS), life safety code (MN), and certified nursing assistant training (KS, MN, OR; data not shown).
The average amount of expenditures for special projects was $47,768 per project for provider projects, $110,052 per project for advocacy projects, and $75,955 per project for other projects (Table 2). Some states gave very small amounts of funds for provider projects (e.g., MD gave $500 each for some projects, whereas TN gave $5,000 each for culture change projects). Most funding was for short-term or one-time projects, and very few projects lasted longer than 1 year.
In examining the 24 states that used funds for projects to improve quality (excluding those for licensing and certification activities), a clear geographic pattern emerged. The states using funds for projects were in the following U.S. census regions: the Midwest (IA, IL, IN, KS, MI, MN, MO, WI), the South (FL, KY, LA, MS, NC, OK, SC, TN, TX), and the Middle Atlantic (DE, MD, NJ). The exceptions were Oregon in the Pacific region, Arizona in the mountain area, and Massachusetts and Maine in New England. Most states using funds for projects were contiguous states, giving some support for geographic concentration of spending funds on special projects.
State officials reported that most of the projects funded by states did not have reported outcomes, and none reported having formal evaluations. States obtained information about project activities primarily from self-reports by the fund recipients and generally lacked information on these activities.
Information on Penalties and Fines
A search of state Web sites on nursing homes in December 2005 revealed that 38 states provided basic information about nursing homes, 21 states had report cards providing specific information about individual nursing homes, 18 states provided specific information about deficiencies given to individual nursing homes, and 7 states had a nursing home rating system through which they rated individual nursing homes on specific criteria (data not shown). Only 8 states reported the number and/or the amount of penalties and fines given to individual nursing homes. We should note that there are no federal requirements that states make information available to the public on the number and amount of penalties and fines collected. Some states reported being willing to make information on penalties and fines for specific nursing homes available under Freedom of Information Act requests. The fund balances from penalties and fines were not available on any state Web site, nor was information available in December 2005 about the specific use of funds from state penalties and fines.
Procedures and Processes
Most state officials (21 of 26 states) reported that they did not have formal procedures established to inform stakeholders about the availability of funds from penalties and fines for special projects (data not shown). Some states reported making information available about the availability of funds either through formal requests for proposals or on state Web sites (KS, MA, MD, NC). Most state officials states (20 of 27 states) did not involve stakeholder groups either in the decision-making process about setting the priorities and the criteria for how funds from penalties and fines should be used or in the project selection process (data not shown). A few states were exceptions, in that they had an advisory committee or formal involvement of stakeholders (AZ, KS, MA, NC, TX); 2 other states (LA, NJ) had a consultation process that involved provider associations (data not shown). Decisions about allocating the funds from penalties and fines were primarily made by the licensing and certification agencies (22 states), although 9 states gave authority over the allocation of funds to the state Medicaid agencies (data not shown).
Case Studies
Table 3 shows the findings from six case studies on the use of funds from penalties and fines. Five of the 6 states used funds for culture change projects (all except MI). Massachusetts and North Carolina funded many small projects. For example, North Carolina's licensing and certification agency funded health care quality improvement projects in nursing homes. In 2002, the Medical Review of North Carolina, a quality improvement organization funded by CMS, administered these projects, which focused on reducing falls and wandering/elopement. In 20042005, a quality improvement project addressed medication safety and selected 60 facilities from 102 that applied to participate. After the first-year report showed an average of 22 errors per 100 beds, the project urged nursing homes to provide training about error rates and institute policies and procedures related to communications and human factors to reduce errors.
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In terms of eligibility to apply for projects, all 6 states allowed a broad range of providers, consumers, and other stakeholders to apply for funds. All 6 states gave the decision-making responsibility for the allocation of funds to the state licensing and certification agency, although Kansas also required approval by the state Medicaid agency, and Maryland required approval of spending by the Maryland legislature.
In terms of the stakeholders' assessment of how the states had used the funds, most providers and consumer advocates supported the fund allocations. Michigan was the exception, because the providers and consumer advocates we interviewed did not consider the previously funded projects to be valuable. Stakeholders in the 6 states had a range of suggestions for the future use of funds from penalties and fines (see Table 3). Most stakeholders wanted funds to be given for quality improvement projects, whereas a few supported using funds for temporary management and relocation of residents and other such activities. Stakeholders viewed the funds from penalties and fines as an opportunity for quality improvement and preventing problems in nursing homes.
| Discussion |
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This study had two important limitations. First, although the study attempted to collect data on the number of federal and state penalties and fines issued as well as the number collected, many states could not or did not report on the number of state penalties and fines issued. State survey and certification officials reported having difficulty obtaining current information from CMS about the number and the amount of federal penalties and fines issued by CMS. Because of missing data, we only reported the total number of penalties and fines collected. Second, there was no way to verify the accuracy of state reports on penalties and fines collected. The federal On-Line Survey, Certification, and Reporting System database from CMS compiles information on federal penalties reported by states, but a comparison of these data with those reported directly by states suggested that the federal data are incomplete for federal actions. The federal government does not require states to report state penalties and fines or other state enforcement actions to the federal government. These problems suggest that the federal government and states need an improved system for recording and reporting federal and state enforcement actions.
As expected, funds collected from penalties and fines represented a resource ($60.5 million in 42 states) that can be used by states to improve the quality of nursing home care. We found wide variations in state spending of funds from penalties and fines, with some states spending a large proportion of the funds collected and 8 states not spending any funds. These findings are consistent with Brown's (1992) framework that wide variations result from decentralized behavioral regulations, especially where there are vague guidelines and little federal oversight in the case of penalties and fines.
Although the amount of funds available from penalties and fines is not large in comparison to the amount spent on nursing homes, these funds represent a relatively unrestricted source that has received little attention by policy makers and stakeholder groups. In 19992005, 32 states reported spending about $28 million in funds from penalties and fines on a wide variety of activities. Of the total expenditures, the states spent 65% ($18 million) on activities related to survey and certification, such as temporary management of facilities, relocation of residents, consultation, and technical assistance to providers.
Twenty-four states spent funds for provider projects, for consumer advocacy, and for other areas, such as training. Many of these projects were related to quality improvement activities and to culture change activities. Five of the 6 states in the case studies used funds for culture change projects, and 4 of the 6 had procedures for informing and involving stakeholders in the process. For states that want to develop procedures for special projects, these 4 states serve as examples for how to develop such procedures.
Some states appeared reluctant to spend funds and/or are using funds only for survey and certification activities or emergency needs. This may explain why some states have not established formal procedures and criteria for funding projects and are hesitant to publicize information about the availability of funds from penalties and fines. The uncertainty of the amount of available funds in the future may make state officials eager to manage funds in a conservative fashion. Perhaps states have a legitimate argument in that they should maintain reserve funds for emergency needs. However, 5 states had more than $3 million in funds, and another 8 states had $2 million in funds available. One policy issue is how much reserve funds states need to maintain for emergencies.
The lack of formal procedures for allocating funds and lack of publicity about the availability of funds from penalties and fines were also prevalent among states that had used the funds. Stakeholders were often uninformed and frustrated in their ability to gain access to information about the use of funds from penalties and fines. Stakeholders advocate for states to develop formalized procedures for use of the funds for special projects and to make information available to the public. Although some state officials argue that their need for maintaining such funds for emergencies is prudent, others support the use of funds for special projects and have developed public information about the funds and standardized disbursement procedures. CMS may want to consider requirements or guidelines for states regarding the development of formalized procedures for using funds from penalties and fines and making information available to the public.
After state and/or federal officials identify nursing home deficiencies and recommend federal penalties, state officials often appear to be unable to obtain CMS information to track the status of federal penalties in the decision-making and appeals processes. Without access to accurate tracking information on federal penalties from CMS, it is difficult for state officials to make federal penalties information available to the public.
Although states do not have any federal requirements with regard to Internet reporting of nursing home information, many states make nursing home Web site information available. However, most states do not utilize their Web site(s) to provide public information about federal and state penalties and fines imposed on individual facilities or to provide summary information about penalties and fines and other sanctions. The Medicare Nursing Home Compare Web site (CMS, 2005) reports federal deficiencies for individual nursing homes but does not report on state deficiencies nor on penalties and fines or other sanctions against nursing homes.
Report card information on penalties and fines for individual nursing homes is useful for the public and may motivate individual nursing homes to improve their quality of care (Castle & Lowe, 2005; Mukamel & Spector, 2003). Some may argue that information on fines should not be made available before or during the long appeals process (Castle & Lowe, 2005). At the same time, some consumer advocates want penalty and fine information, including the status of the penalties and fines (e.g., issued, under appeal, or finalized), made available. CMS may also want to require states to make available information about fund balances from penalties and fines and to notify stakeholders formally about the availability of funds and procedures on how to apply for funds. Alternatively, CMS could provide incentives or rewards for states that meet CMS guidelines for providing information.
State licensing and certification agencies that do not have control over the funds for penalties and fines are at a disadvantage in providing information and involving stakeholders in the use of funds. Although state Medicaid agencies may want to control spending of funds, states should be able to establish a process by which the licensing and certification program, which is the most knowledgeable program about nursing home quality problems and priorities, would have primary or at least joint responsibility for fund management and distribution.
There was a clear geographic pattern in that states in the Midwest, South, and Middle Atlantic were more likely to fund nursing home quality improvement projects. A small number of states made wide use of the funds from penalties and fines for a range of interesting projects. The factors that encouraged this type of state approach were not clear and were beyond the scope of this project. Perhaps, however, the role of active stakeholder groups may be important in fostering the approach of using funds for a wide range of projects. CMS may want to encourage greater use of funds for quality improvement projects and use the process of fund allocation from the more active states as models for other states.
In reviewing the projects that were funded, most of these were short-term, one-time projects that received only small amounts of funding. States should consider whether larger projects implemented over time may have a greater impact on changing nursing home quality than small one-time projects. States may also want to support projects that can become self-sustaining over time or that can be replicated.
A number of states have been developing training for implementing clinical guidelines and have been working with the federally funded Quality Improvement Organizations. These efforts have focused on a wide variety of common and important problems such as pressure ulcers, falls, weight loss, and medication errors. Such projects have a potential for directly addressing the quality of care problems in nursing homes (Medical Review of North Carolina, 2005). On the other hand, the continued high nursing staff and administration turnover rates in nursing homes make training of an unstable workforce unlikely to have a substantial impact unless that training is conducted frequently or is ongoing (Castle & Engberg, 2005; Harrington & Swan, 2003). The field needs evaluations of the impact of training projects on long- and short-term outcomes.
In this study, some states provided anecdotal evidence and self-reported data by projects about the outcomes of specific funded projects, none of which were formally evaluated. These findings are consistent with those of White and associates (2003), who showed few evaluations on state projects for quality improvement. States should consider utilizing independent evaluators or at least requiring an outcomes report for each project. One approach would be to solicit projects sponsored by, or projects jointly conducted with, academics at universities or evaluators at research organizations to help ensure that projects are carefully designed and have evaluations that can determine short- and long-term outcomes. This could result in projects having a greater impact. Without being able to show that expenditures of funds have useful benefits, the funds may lose legitimacy and become vulnerable to other uses.
States also appear to be responding to popular demands from both provider and consumer groups to fund culture change through a variety of Eden Alternative and Greenhouse models (Eden Alternative, 2005; Hamilton, 2005; Thomas, 2004), Wellspring projects (Stone et al., 2002; Wellspring, 2005), and Pioneer Network projects (Pioneer Network, 2005). Although researchers have documented the desirability of culture change (Wunderlich & Kohler, 2001), they have not clearly determined the approaches most likely to be effective. States appear to be selecting from a grab-bag of options with little guidance about which types of culture change projects may have a measurable impact. Researchers have conducted few studies on these types of projects (Bergman-Evans, 2004; Hamilton & Tesh, 2002; Rosher & Robinson, 2005), investigators do not know the conditions under which such culture change projects may be effective. Evaluation research at the state and federal levels regarding effective and efficient clinical guideline implementation and culture change projects could help guide state officials and stakeholders in the allocation and decision-making processes about the use of funds from penalties and fines.
In summary, funds derived from penalties and fines represent a unique opportunity for states to support programs specifically tailored to benefit nursing home residents. Although states funded many valuable projects, our findings indicate a great potential for improving the way states utilize these funds. Public policy makers should give greater attention to policies and practices related to the management and reporting of funds collected by states from penalties and fines.
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1 Department of Social & Behavioral Sciences, University of California, San Francisco. ![]()
2 Long Term Care Community Coalition, New York, NY. ![]()
Decision Editor: Linda S. Noelker, PhD
Received for publication January 17, 2006. Accepted for publication July 12, 2006.
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