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Nursing homes throughout Mass. face 'colossal collapse' from Medicaid shortfall
Telegram & Gazette - 1/27/2019
Jan. 27--WORCESTER -- The economy is booming, unemployment is low and a "silver tsunami" of baby boomers -- the wealthiest generation in U.S. history -- are beginning to retire and make decisions about their long-term health care. It seems like it would be a good time to be in the nursing home business.
But in reality, senior care advocates, workers and even residents say the industry is in a financial crisis in Massachusetts.
According to the Massachusetts Senior Care Association, an advocacy organization for skilled nursing facilities, 20 nursing homes closed in the last year and more than half of the 401 nursing facility providers in the state are operating in the red.
"It's pretty clear that most nursing homes are struggling," said Sandra Mahoney, administrator at Christopher House. Christopher House posted a slight deficit in 2018 after making a slight profit in 2017, according to the nonprofit's tax returns.
Ms. Mahoney said she has been a nursing home administrator for just over 20 years.
"This climate is the most challenging," she said.
Steven Raso, principal of Landmark Management Solutions, an owner, operator and manager of four skilled nursing centers, including St. Francis Rehabilitation and Nursing Center in Worcester, agreed with Ms. Mahoney.
"(Massachusetts) is the state you go to for the best higher education, the best acute care needs, the best biomedical jobs," said Mr. Raso. He said St. Francis is operating at the industry average: a 2 percent loss this year. "But if you want to grow old here ... "
Camillo Quitadamo is one of the 40,000 nursing facility residents daily in the state who is growing old here. He can spot a dedicated nursing home worker.
The 91-year-old resident of Christopher House in Worcester observed, "It's the interest they take in you."
He added, "A lot of them refer to me as 'Papa.' You've got some real nice people here, they treat you like family."
Certified Nursing Assistant Hawa Williams also spoke of "the family setting" at Christopher House. In fact, her mother and sister also work at the nursing home.
"I love it here, the interaction with the patients," Ms. Williams, 34, said. "I come to work, and it's like you're home."
But workers like Ms. Williams are often hard to find -- and Mr. Quitadamo notices.
"It's a shame they can't get them more help," Mr. Quitadamo continued. "If you could pay them just a little bit more, there wouldn't be so much change ... the ones that don't care don't stay."
Although Mr. Quitadamo stressed he is very satisfied now, he said he worries this lack of help could eventually affect his care.
"It's too bad we can't get help -- it's not just here, it's all nursing homes," Mr. Quitadamo said. "My story is really if we could get more help, things would go a heck of a lot better."
Legislators are starting to pay attention.
"Everyone knows someone who is in a nursing home or will be in a nursing home at some point," said state Senate President Emerita Harriette Chandler, who filed legislation last week to help nursing homes. "If these closures continue we are going to have a very serious emergency -- not a problem, an emergency -- on our hands."
And as a result of this emergency, advocates say, people like Mr. Quitadamo and Ms. Williams will suffer.
"The residents suffer, the staff suffers -- and the staff are mostly minority and female -- and I don't have a magic wand to fix this," said Robert Oriol, chief executive officer of Oriol Health Care. Oriol Health Care, which Mr. Oriol said posted a "moderate loss" last year, owns and operates Holden Rehabilitation and Skilled Nursing Center in Holden and Oakdale Rehabilitation and Skilled Nursing in West Boylston. "We try to make smart choices and think we do, and we are going to survive and put residents first."
NURSING HOME ECONOMICS 101
Nursing home economics is complicated.
But to try to simplify things, nursing homes traditionally rely on two separate services with separate revenue streams.
The traditional, long-term nursing home care is typically used by patients who are more likely to be older, to have dementia or other cognitive impairments, and to be totally dependent on assistance for activities of daily living such as bathing, eating and more.
For these patients, the nursing home is their residence and they either pay privately or, more typically, depend on Medicaid (known in Massachusetts as MassHealth) to pay for their care.
Nursing homes and facilities also serve short-term patients seeking rehabilitative services. This generally younger, healthier patient returns home after a brief stay and generally pays with Medicare or a health maintenance organization.
The problem, advocates say, is Medicaid reimbursement rates, which are based on 2007 costs, don't fully cover the cost of daily care. The typical Medicaid-participating nursing facility will see an annual $900,000 in uncompensated care, according to the MSCA. The Medicaid shortfall in Massachusetts is among the highest in the nation. But the state has a $1 billion surplus, according to Gov. Charlie Baker.
"When you finally have money, you pay the bills," said Mr. Raso. "The state has been ducking paying the long-term care industry for the last 10 years. Now that they have a significant surplus, it's time to pay this bill."
Historically, short-term and private-paying individuals offset the shortfall in Medicaid payments.
However, the balance between Medicaid and other payment sources has shifted in recent years.
In 2011, an average of 66 percent of nursing home patients statewide depended on Medicaid, while 15 percent paid with Medicare, 14 percent paid privately and 5 percent paid from other sources, according to the MSCA.
In 2017, the organization said, an average of 69 percent of nursing home patients statewide depended on Medicaid, while 13 percent paid with Medicare, 13 percent paid privately and 5 percent paid from other sources.
That shift may not seem that dramatic.
But it is coupled with an almost 25 percent cumulative reduction in short-term skilled nursing facility stays in that time, which has led to a $300 million decline in revenue since 2011, according to the MSCA.
Before the impact of the Affordable Care Act, enacted in 2010, the average short-term stay was 21 to 23 days, according to the MSCA. But among other factors, accountable care organizations have been trying to control the number of days in rehabilitation. Post-ACA, the average stay is less than 14 days, the organization said.
Moreover, nursing homes are financially penalized if they don't have 94 percent occupancy. The industry median is an occupancy of 90 percent, according to the MSCA. (Prior to the 20 closures, occupancy was at 85 percent, the organization said.)
Finally, the rise in other treatment options such as home care and assisted living suggest trends of nursing homes increasingly serving MassHealth patients will continue.
"A lot of folks when they need our care, they have exhausted (private) resources," said Ms. Mahoney.
The result is that already slim operating margins are crunched further, said advocates.
Between 2014 and 2017, profit margins peaked in 2015: at 1 percent for the average nursing home in the state, according to the MSCA.
In 2017, the average facility posted a 1.6 percent loss.
And the more MassHealth patients, the lower the profit margins, according to the MSCA.
For facilities with 50 percent or more MassHealth patients, profits peaked at .5 percent in 2015. In 2017 they were at -2.1 percent.
The average facility with 75 percent or more MassHealth patients came closest to making a profit in 2015 by only losing .7 percent. In 2017, those facilities lost an average of 3.2 percent.
"This (Medicaid shortfall) has been going on for years," said Matt Salmon, chairman of the board of the MSCA and also CEO of Salmon Health and Retirement, a family-owned senior care provider with local facilities in Worcester, Northbridge and Northboro. The company as a whole was profitable in 2018 although its nursing homes operated in the red, Mr. Salmon reported. "It has been in an acute stage for the last two or three years and will be worse if we don't change things ... We've predicted a 'colossal collapse' coming in Massachusetts and it's here now."
CARE AND ITS COSTS
So what does this 'colossal collapse' look like?
One impact is on staffing.
Nursing homes spend three quarters of every dollar on staff wages and benefits for the 77,000 total employees in the sector, according to the MSCA. Eleven cents is spent on general expenses/operating expenses, 8 cents is spent on the physical plant and 6 cents is spent on administration.
"Most of our costs are human costs," said Ms. Mahoney. "The impact of minimum wage and trying to remain competitive for nurses and certified nursing assistants is costly."
Nursing homes are also competing for workers, particularly CNAs who provide the direct care, with other health care providers not constrained as much by Medicaid reimbursements.
CNAs at a nursing home where 68 percent of residents depend on Medicaid earn an average of $14.33 an hour, according to the MSCA. Comparatively, a home health aide who has an average of 42 percent of his or her patients on Medicaid can earn an average of $16.45 an hour. A hospital with an average of 20 percent of patients on Medicaid can pay a CNA $17.20 per hour.
So nursing homes increasingly compete with other entry-level employers for workers.
"We can't get staff because we're competing with Dunkin' Donuts," said Mr. Raso, noting that Dunkin' can pay $16 an hour. "Feeding an elderly person who may be demented and combative is much more difficult than pouring coffee, and the pay structure should respectively correlate to that level of difficulty."
As a result there were 630 unfilled positions, representing 14.3 percent of direct-care nursing jobs, in Worcester County in 2018, according to the MSCA.
"We're not letting them go unfilled; we can't fill them," said Mr. Salmon.
Ms. Mahoney said it takes two to three times longer than normal to fill jobs in every department at Christopher House.
And a minimum wage increase of $1, which is an effective 9 percent increase, will further depress profits, said Mr. Raso.
"If we're already at -2 percent, it will take us to -3 percent, and the industry will hit the rocks," said Mr. Raso. "You're going to see more buildings close."
But perhaps most importantly, nursing home advocates worry this is starting to affect care.
In fact, 21 percent of nursing homes in Massachusetts have or have considered closing admissions because of a staffing shortage, according to the MSCA.
The number of deficiency-free facilities -- deficiencies include everything from expired milk in the fridge to serious patient care issues -- has also dropped in the last three years. A high of 32 percent of nursing facilities were deficiency-free in 2013; 13 percent were deficiency-free in 2017, according to the MSCA.
"So many open positions rely on temporary nurses," said MSCA President Tara M. Gregorio. But she notes temporary workers often don't know patients and the staff. "You can see poor outcomes sometimes."
In fact, nursing facilities that care for more Medicaid patients have lower quality ratings, more deficiencies and less staff than facilities with low numbers of Medicaid patients. According to the MSCA, nursing facilities with less than 50 percent of residents on Medicaid received an average of 4.4 stars on the Centers for Medicare and Medicaid Services Five-Star Quality Rating System in 2017 and had an average of 3.2 deficiencies. Facilities with more than 75 percent of Medicaid patients received an average of 2.9 stars on the rating system and had an average of 7.2 deficiencies. The statewide average ranking is 3.4 stars with six deficiencies. The facilities with less dependency on Medicaid also had more staff.
So nursing homes like Christopher House have had to get creative -- hiring new graduates rather than experienced CNAs, emphasizing the family atmosphere that appeals so much to Ms. Williams and Mr. Quitadamo, and hosting student clinicals to make a job offer as seamless as possible.
Nursing homes are also looking to legislators for help.
Ms. Chandler has filed legislation proposing to create a 13-member emergency nursing home task force to make policy recommendations to ensure the financial stability of the nursing homes in the state.
"I feel we're at a crisis level," said Tim Foley, executive vice president of 1199 Service Employees International Union, which represents approximately 3,000 nursing home workers and is promoting the legislation. "We need to come together and come up with solutions as we integrate nursing home systems into our health care delivery system ... the union and the industry have to work together to come up with solutions to this crisis."
Ms. Chandler has also filed An Act Relative to Stabilizing the Commonwealth's Nursing Facilities, legislation proposing to increase Medicaid reimbursement rates for nursing homes by updating them to reflect 2017 costs. The legislation also proposes updating the Medicaid reimbursement to reflect annual inflation, and establishing a grant program to financially assist entry-level nursing home workers trying to advance their careers.
"Boy, is it needed," said Ms. Chandler. "We really need to invest in our nursing home facilities to support our seniors ... and as I get older, I see this in very personal terms."
Ms. Gregorio and Mr. Salmon estimate updating rates using 2017 costs will cost $75 million, half of which would be reimbursed by the federal government.
Adjusting the Medicaid reimbursement to reflect annual inflation of 2 percent would cost an estimated $34 million, they said.
Finally, the organization also seeks to adjust the occupancy penalty so that it reflects the median occupancy of 90 percent in nursing homes rather than 94 percent.
That would cost approximately $85 million.
Mr. Foley was optimistic the legislation would be enacted, noting that similar legislation for a task force nearly made it over the finish line last year.
He also praised Mr. Baker's 2020 budget, which allocates $38.3 million for increasing wages to retain and recruit workers in the industry.
"Our workers are the most caring people in the world," Mr. Foley said. "They want to provide good quality care, and want to make sure families' loved ones are taken care of in their senior years ... We know the best solutions to improving care in nursing homes, hospitals and home care is in workers."
Back at Christopher House on Thursday, however, legislation and political advocacy were not on Mr. Quitadamo's mind. He was visiting with his favorite CNA, Sheila Spellman, his go-to for helping him get out of bed and shaving in the morning.
"We have a beautiful system between us; no arguing," Mr. Quitadamo said, smiling.
And Ms. Spellman said she couldn't think of any other job she would rather do than help her patients.
"It's my way of sharing who I am to other people," Ms. Spellman said. "He takes the place of my (late) dad. He reminds me a lot of my dad."
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