A loose-knit band of adult-family-home owners outmaneuvered Olympia to avoid higher annual fees that would help pay for oversight of their industry.

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Soon after lawmakers banged the last gavel on the state budget, both the Governor’s Office and the state’s largest agency were surprised to learn that the burgeoning adult-family-home industry, again, had escaped a long-sought fee increase.

The Department of Social and Health Services (DSHS), which licenses the homes and expects fees to cover such costs as inspections and investigating complaints, had sought a substantial increase for years.

Adult homes pay $100 a year for a license, which represents only 4 percent of the regulatory burden, according to DSHS.

Gov. Chris Gregoire had put a $1,000-per-year fee increase in her proposed budget. The state expected the increase to make it less easy to open a home and to provide DSHS with more funds for oversight.

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How a loose-knit band of adult-family-home owners outmaneuvered Olympia highlights how salesmanship, good timing and compelling testimony sometimes can be more powerful than clout.

Adult-family homes are a growing, lightly regulated housing option for the state’s aged and frail. DSHS licenses residential homeowners to rent out bedrooms and provide care for up to six residents.

The homes also were the subject of a recent Seattle Times investigation, “Seniors for Sale,” which uncovered myriad accounts of inadequately trained caregivers who imprisoned the elderly in their rooms, roped residents into beds at night and drugged others into submission.

The Times also found that DSHS repeatedly excused reports of abuse and neglect, even when it knew that violators lied to its investigators, provided falsified medical records or contributed to preventable deaths.

The industry, which began as mom-and-pop operations decades ago, has become crowded with profiteers, many with scant experience in health care or running a small business, The Times found.

Even before the series concluded, Gregoire ordered DSHS to review its practices and suggest possible reforms.

It appeared that adult homes would be required to make some changes, including paying for their share of state oversight.

“A lot of resistance”

“I wanted to increase the license fee to keep out people who are just in it for the bucks,” said state Sen. Karen Keiser, D-Kent, who heads the Senate Health and Long-Term Care Committee. “But it became an exercise in frustration.

“I ran into a lot of resistance because people think of adult-family homes as little mom-and-pop businesses and they [legislators] are afraid of hurting them.”

State Rep. Eileen Cody, D-Seattle, chairwoman of the House Health Care Committee, sponsored the House version of the bill, which would have increased the annual fee to $1,100, and soon found herself inundated by e-mails from adult-home owners. She said she also was opposed by legislators who were flooded with similar letters and e-mails and worried about angering constituents during the economic downturn.

These business owners were a formidable force. There are 2,854 adult homes in the state, with about half in King County. Many adult homes are operated by caregivers with stellar records.

Among the adult-home owners who testified to the Senate in March was Barbara Mack, of Deer Park in Spokane County, who cares for six developmentally disabled adults. She tearfully described how DSHS trimmed Medicaid rates last year by 4 percent — representing a $6,000 cut in her annual revenue. Many owners have “no wiggle room” to pay higher fees, she said.

The House bill passed and was modified in the Senate, but the revised version failed to reach a final vote in the late hours on the last day of the special session. In part, Cody blamed timing — the vote came during the week of “Tax Day” protests — as well as “revenue fatigue”: lawmakers at the end of weeks of hashing out fee hike after fee hike.

The last bill of that long night, Cody said, proposed modest fee increases for nursing homes. It passed without much debate or opposition.

Nursing homes will pay an annual fee of $327 per bed, which covers 85 percent of state oversight costs. Boarding home and assisted-living facilities will pay $106 per bed, which covers 77 percent of costs. Adult-family homes will still pay $100.

High turnover

There are no limits to how many adult homes a licensee can operate; at least 322 owners operate two or more homes. One Eastern Washington owner operates nine, DSHS records show.

DSHS licenses one new adult home every day, on average. But for every four new homes, three go out of business.

The constant churn within the industry may contribute to more cases of abuse or neglect, state records show.

The Times found dozens of cases since 2005 in which cash-strapped adult-home owners failed to provide enough meals, pay utility bills that subjected frail residents to frigid temperatures or hire enough staff, which left bed-bound residents in their rooms for days because there was no staff to move them, state records show.

Finding the funds

Kathy Leitch, who oversees the DSHS Aging and Disability Services Administration, said the agency believes it’s unfair for adult homes to bear so little of the regulatory burden.

The agency will move money from other parts of its budget to supervise the homes.

Cindi Laws, director of the adult-family-home trade association, said the industry supports a “fair increase” in fees, not a tenfold increase in a single year.

Cody and Keiser said they will work to increase adult-home-license fees in next year’s session.

“It was foolhardy of us to keep the fee so low for so long,” Keiser said.

Michael J. Berens: 206-464-2288 or mberens@seattletimes.com