Nursing Homes Face Unusual Budget Juggling Act with Medicaid

Dec 05, 2012 at 09:02 am by steve

John Matson

 “Nursing homes are the only Medicaid providers in the state that file a cost report. Others get reimbursed by fee-for-service,” says John Matson of the Alabama Nursing Home Association, an organization whose membership includes 94 percent of nursing homes in the state.


All but about ten of Alabama’s 231 nursing homes accept Medicaid patients, with an average of 68 percent of each home’s residents relying on Medicaid to foot their bill. “Some rural nursing homes may be at 98 percent. It just depends on the community,” Matson says.


The daily reimbursement amount varies for each nursing home. “They each file a detailed annual cost report to provide various services to residents to, for example, purchase raw food, medical supplies, or have nursing care and assistants,” Matson says.


On average, Alabama Medicaid doles out $179 per day per person for nursing home care. “You think that’s a lot of money, but if you go to a Hampton hotel, you’re paying $120 a night,” says one nursing home administrator. “But you’re not getting three meals, a registered dietician, laundry, and around-the clock nursing care for that either.”


The Alabama Medicaid Agency plugs the facilities’ numbers into a formula and determines the daily rate. That rate gets adjusted twice a year, based on inflation or other factors. “The formula is built in a way to encourage facilities to put resources toward caring for residents. So things like raw food and nursing staff get covered more than building expenses and insurance costs,” Matson says.


“If you achieve certain efficiencies, you can be awarded some bump in your rate,” says Patrick Nicovich, who served as director for Jefferson County Rehabilitation and Health Center for 24 years. “If you get salaries below the ceiling, then based on that formula, you can get a bonus.”


However, if a facility doesn’t spend the money allotted for a particular category or spends in the wrong places, their rate drops. “It’s like walking a tightrope,” Nicovich says. “You’re trying to manage patients’ care and medical needs with the budget that fits the formula. It’s a balancing act. It’s what nursing homes have to do.”


To compensate for the losses incurred by Medicaid patients, nursing homes set a quality mix ratio that includes private-payer and Medicare patients to bump their income. “Although Medicare covers a much shorter period of time, it’s more than double Medicaid’s rate,” Nicovich says.


Medicare pays about $400 a day for up to 100 days. The short-term stay serves to rehabilitate patients back to baseline, such as after a stroke or hip surgery. To quality for those patients, the nursing home must staff for physical, occupational and speech therapy as well.


Despite the daily-rate juggling act, Alabama nursing homes exceed expectations. “The Centers for Medicare and Medicaid Services has 15 different quality measures they use for ranking. Alabama is better than the national average on 12 to 13 of those, and we’re top in the Southeast on those measures,” Matson says. “In that respect, we do very well.”


Matson says Alabama’s success stems from the facilities choosing to pull together to solve issues. “For instance, we worked together to address bed sores and then we addressed the problem of weight loss. That is how care has improved drastically in Alabama for the past 20 years,” he says.


Nicovich says the margins in the nursing home business don’t even run to nickels and dimes, let alone dollars. “But even at a nickel, you work to get it to a eight cents, just like any other business,” he says. “And it’s apparently serving some need, and they must be making something, because they’re still there.”


But the future, says J.M. “Mickey” Trimm, PhD, associate professor at the UAB Health Services Administration, could hold changes for nursing homes. “With the baby-boom bubble on the horizon, many more people going to need care, and there’s no way Medicaid is going to be able to ramp up to cover the flood of eligible seniors,” he says.


Matson says the uncertainty lies with the changes in healthcare itself. “I don’t mean to dance around this, but it’s hard to determine how the Affordable Healthcare Act is going to affect our nursing homes,” he says. “We know it’s going to affect the employer side because of the employer mandate having to provide health insurance. It will all unfold in the next two to three years. The answers will come in time.”


The greatest unknown for nursing homes rests with the potential federal mandate of Alabama Medicaid roles expanding to include several hundred thousand more people. “If the federal subsidies for those people go away after a few years, then state policy makers are left to make choices as to what to fund,” Matson says. “And that could really affect nursing homes.”

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