Medicaid Shortfall Clobbers Nursing Homes
A recent study named Massachusetts as the third worst state in the U.S. when it comes to Medicaid payments for nursing homes.
The report by American Health Care Association, a nursing home industry group, found that the state Medicaid program, MassHealth, pays about 16 percent less than what it actually costs to care for a resident.
Since MassHealth provides an average 67 percent of the revenues for the state’s nursing homes, it’s not an insignificant problem.
Industry Decline
So, how do the state’s nursing homes deal with the shortfall? According to Scott Plumb, senior vice president of the Massachusetts Senior Care Association, which is AHCA’s Massachusetts arm, it’s often simple.
“What many of them do is close,” he said.
Plumb said the number of nursing homes in the state fell from 580 to 420 over the past 18 years. While most of the remaining nursing homes don’t currently have enough residents to fill their beds, he said space may become an issue quite rapidly as baby boomers age.
According to the AHCA report, Medicaid underfunding has become particularly significant nationwide in the past year, as the recession has reduced states’ ability to contribute to the program, which gets money from both the state and federal level.
And it says 2011 could be even worse because federal stimulus funds that have helped prop up the program are set to expire in July.
For nursing homes in Central Massachusetts, staying open already requires a careful balancing act.
“We pinch pennies,” said Alan Cormier, administrator of the Legend Rehabilitation & Nursing Center, a family-owned 120-bed facility in Gardner.
Cormier said that with Medicaid funding essentially flat for the past several years, the center has been struggling with increases in basic costs like electricity. But he said the biggest issue is staffing, which makes up the vast majority of all nursing homes’ expenses.
Despite his best intentions, Cormier said, he generally can’t pay more than minimum wage for certified nursing assistants. When it comes to hiring nurses, though, he said he has to pay more each year if he wants to fill his vacancies.
“Nurses are in short supply, and we have to compete with hospitals and the like for them,” he said.
Like most businesses, the Legend Center also struggles with the cost of employee health insurance, which rises far faster than inflation.
Despite all that, though, Cormier said it costs the nursing home an extra $30 to $35 per day to care for each MassHealth resident beyond what the program pays. And 80 of his 120 beds are typically filled by someone receiving MassHealth benefits.
“I’m short $30 times 80 patients, times 365 days a year,” Cormier said. “You can kind of do the math.”
Some nursing homes operate as nonprofits and get some extra money from donations, and others are large chains that can achieve some economies of scale, but Cormier and others said the main way to fill the MassHealth gap is balancing the mix of payers that fund residents’ stays.
Revenue Sources
Medicare and private insurance companies usually only pay for short stays. So just about all nursing homes have sprouted arms that deal specifically in rehabilitation, and many also have assisted-living divisions that are more likely to attract people paying out of pocket.
Holy Trinity Eastern Orthodox Nursing & Rehabilitation Center in Worcester is a nonprofit with a short-term rehabilitation program staffed with therapists.
Since 2006, it’s also run a hospice program.
“Hospice programs can generate a surplus if they’re run right,” said Karen Laganelli, Holy Trinity’s executive director.
Laganelli said Holy Trinity markets its revenue-generating divisions in an attempt to get more patients who bring private insurance or Medicare with them.
And she said it certainly helps that the nursing home is a nonprofit.
“Our financial goal for the organization is not to try and generate a surplus,” she said. “It’s rather to try and only lose so much per year that we can make up for in donations.”
Relying on Medicare to subsidize treatment of Medicaid patients is a tricky proposition since federal authorities are eager to reduce the cost of Medicare.
The AHCA report noted that Medicare payments to skilled nursing facilities were reduced in 2009 to correct for previous overpayments, reducing the program’s ability to make up for Medicaid shortfalls.
Meanwhile, MassHealth funding comes from both federal and state sources, and faces difficulties on both sides. Both Laganelli and Cormier said they’re well aware of the problems that have hit the program, especially since the start of the recession.
“It’s not an easy thing to solve,” Cormier said. “It really isn’t.”
For the moment, he said, the state’s nursing homes are just hoping to hang on until the economy, and the state and federal budgets that MassHealth relies on, improve.
“It’s getting pretty grim,” he said. “Hopefully things will break loose a little bit.”
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