Late payments create 'snowball effect' for nursing homes

Dec. 17--Depending on whom you believe, the state of Illinois is about 3 months behind on its Medicaid reimbursement payments to nursing homes.

Apparently, that's not bad.

A few years ago, the state was about 8 months behind. It owed Pinecrest Manor in Mount Morris about $1 million, said CEO Ferol Labash.

Those kinds of late payments make it difficult to meet constantly changing building and fire code standards. Although administrators have learned to deal with the delay, late payments still are the biggest challenge when it comes to running their facilities, they say.

When it comes to spending money, Rhonda Biller, administrator at Polo Rehab & Health Care Center, said a facility must be "creative" when deciding what's an immediate need and what can wait.

About 60 percent of residents at Polo Rehab are on Medicaid, Biller said. But the home is owned by Petersen Health Care of Peoria, the biggest nursing home owner in the state, so delayed payments don't have the same impact as they might at nursing homes owned by smaller companies or nonprofits.

Petersen Health Care recently bought Tammerlane Health Care Center in Sterling, now called Rock River Gardens, and Transitions Nursing and Rehabilitation Center in Rock Falls, now called Sauk Valley Senior Living & Rehabilitation. With the new additions, the company owns five nursing homes in the Sauk Valley and about 65 in the state.

In July 2011, the average daily payment for nursing home residents in the state was $132.89, according to information provided by the Illinois Department of Healthcare and Family Services. In July of this year, the average was $144.35, after having dropped to $129.39 in 2012 and $129.62 in 2013.

The per diem -- or amount the state pays for each Medicaid resident for each day -- is set by three different factors: the support, capital, and nursing rates.

The support rate covers general service and administration costs associated with residential care. The capital rate reimburses costs associated with maintaining the building and paying its mortgage, but is blended by looking at the inflated historical cost for each bed in the building and the uniform cost for each bed in similar facilities in the region.

The nursing rate is set by looking at the the health care needs of the facility's residents, which are listed in the Minimum Data Set each facility completes. The higher the level of care the residents require, the higher the nursing rate.

Because of long-standing rate freezes, though, these rates are calculated based on cost reports as far back as 1998 in some cases, said Kelly Cunningham, deputy administrator for the Illinois Department of Healthcare and Family Services' Division of Medical Programs.

That relatively good 3-month delay in reimbursement isn't likely to last much longer, though, said state Rep. Mike Smiddy, D-Hillsdale, who represents the 71st District.

"Unfortunately, because of the budget constraints in the next fiscal year, I think it's going to get worse," he said.

Both Smiddy and state Rep. Tom Demmer, R-Dixon, who represents the 90th District, say the funding probably could be higher for state agencies that regulate and oversee nursing homes, but the financial climate in the state makes that difficult.

"Our No. 1 goal should be to protect the safety of people in Illinois," Demmer said. "If you're an Illinois resident and you enter a facility, you have an expectation that the state is putting together some plan to ensure those organizations operate safely."

The tough question the General Assembly is faced with, Demmer said, is determining what is most important and needs to be paid quickly, since the state's delay in payments isn't limited to Medicaid reimbursement.

"We've tried to put a priority on medical bills," he said. "All the providers have asked for some priority treatment, and we're just trying to get there."

State Sen. Tim Bivins, R-Dixon, said he couldn't say whether IDPH and other state agencies that regulate and oversee nursing homes are funded well enough to do the jobs they've been given, but he said recently state agencies he's spoken with are pushing to have their funding remain consistent and not be cut as the state wrestles with its finances.

Like Smiddy, Bivins said he expects the delay on Medicaid reimbursements to grow, but voiced some optimism that new leadership could make a difference.

"I don't know what else can be done right now to make payments on time," Bivins said. "Hopefully, going forward, with a new administration, progress can be made."

Businessman Bruce Rauner, a Republican, will become governor in January after he defeated Democratic Gov. Pat Quinn in November. A Rauner spokeswoman didn't respond to an email seeking comment about the role of state government in regulating and overseeing nursing homes, and how Medicaid reimbursements to nursing homes might be sped up.

The delay in reimbursements, and their amount, is part of the reason Morrison Community Hospital is closing its nursing home, hospital administrator Pam Pfister said.

Because it's a critical access hospital, MCH must allocate a portion of its overall budget to each department based on the amount of space it takes up. For example, Pfister said if the nursing home covered 20 percent of the hospital's overall square feet, 20 percent of its budget would have to be allocated for the nursing home.

"It's kind of a double hit for us, where the reimbursement is not adequate, [and] the timeliness of that reimbursement is not adequate," she said. "Plus, because we're a critical access hospital, it adds a negative hit for us. It has a negative impact on our cost report overall."

That double whammy has caused the hospital to lose about $900,000 in funding over the past 4 years, Pfister said.

The statewide total per diem for a nursing home, as of July 1, was $144.35. Most Sauk Valley nursing homes were below that mark; two had higher per diems.

The combination of rising standards for health and fire and safety codes, and late and low payments, according to nursing home administrators, makes it difficult to meet those standards.

"I think the state is very concerned with the safety of the residents, and I'm 100 percent on board with that," Pfister said. "The flip side of that is, because of the poor reimbursement from the state, it's very challenging for these long-term-care units to keep up with those changing standards."

Nursing homes that have more than 80 percent of their residents on Medicaid can be placed on an expedited payment plan.

Rock River Gardens is one of them. Angela Mehlbrech, the facility's administrator, said even the expedited plan can have delayed payments, sometimes about 60 days.

"It's just a matter of finding the balance of what are 'mission critical' items that you need to spend the funds on, and then how else can we find ways to get funds for other things," she said. "It's always tricky."

The recent change in ownership might make the reimbursement delay easier to take, since Petersen Health Care is more able to pool resources for all of its about 65 nursing homes.

But that's a benefit not all area nursing homes have. Seven of the 19 nursing homes that plan to remain open for all of 2015 are nonprofits.

"The biggest expense is payroll," Mehlbrech said. "And if you don't have the staff to provide the care, then you're facing those surveys that are going to drag your numbers down. It just creates a snowball effect."

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