Nursing Homes in 3 States Face Profit Limits as Massachusetts, New York, New Jersey Move to Improve Care

Nursing homes receive billions of taxpayers’ dollars each year to care for the chronically ill frail elderly, but until now there was no guarantee that this was how the money would be spent.

Now, Massachusetts, New Jersey and New York are taking unprecedented steps to ensure they get what they pay for, following the devastating impact of COVID-19-exposed staffing and infection control problems in nursing homes.

The three states have set requirements for how much nursing homes should spend on residents’ direct care – and imposed limits on what they can use elsewhere, including administrative expenses, executive pay, advertising and even how much they can put in money as profit. Facilities that exceed these limits must repay the difference to the state, or the state will deduct this amount before the bill is paid.

State mandates mark for the first time that nursing homes have been told how to use payments from government programs and residents, according to Cindy Mann, who served as Medicaid chief under the Obama administration.

With this strategy, proponents say, nursing home residents will not become inadequate in care, and violations of federal quality standards should fall because money needs to be spent on residents’ needs.

“If they are not able to pull that much money away from care and spend it on staff and actual services, it should make a big difference,” said Charlene Harrington, who has spent four decades studying nursing home allowance and regulation.
University of California-San Francisco School of Nursing

“If they are not able to pull that much money away from care and spend it on staff and actual services, it should make a big difference,” said Charlene Harrington, professor emeritus at the University of California-San Francisco’s School of Nursing. who has spent four decades studying nursing home allowance and regulation. “I would expect the quality of care to improve significantly.”

But Andrew Aronson, president and CEO of the Health Care Association of New Jersey, said: “The actual effect will be just the opposite. By trying to force providers to put more money into direct care, you create a deterrent for people to to invest in their buildings, which will push quality down. “

Next year, New York care facilities will spend at least 70% of their revenue – including payments from Medicaid, Medicare and private insurance companies – on resident care. And at least 40% of these direct care expenses must be paid for employees involved in practical care.

In Massachusetts, Governor Charlie Baker issued rules requiring nursing homes to spend at least 75% of all income on residents’ care.

New Jersey law requires its nursing home to spend at least 90% of its revenue on patient care. However, its state regulators have suggested that the requirement only applies to Medicaid funding, even though no final decision has been made.

All three states promise a boost in Medicaid payments for facilities that comply with the laws.

Harrington and other advocates say the measures are delayed. But they keep an eye on how regulators in each state define direct care, who qualifies as a direct care worker, what counts as income, and whether it is reported accurately.

Jim Clyne, president and CEO of LeadingAge New York, which represents nonprofit nursing facilities, questions the legality of some provisions of New York law.

“I do not think there is any doubt that it will end up in court,” Clyne said.

Andrew Aronson, President and CEO of the Health Care Association of New Jersey.

Andrew Aronson, president and CEO of the Health Care Association of New Jersey: “As long as COVID is in our community, it will also find its way to our facilities.”
Provided

Aronson said the mandate is based on a misconception that nursing homes could have kept COVID out of their facilities if only they had pooled their resources properly.

“As long as COVID is in our community, it will also find its way to our facilities,” he said.

However, poor practice of infection control due to inadequate staffing has been most common violation cited by nursing home inspectors over the years, according to a study last year by the Federal Government Accountability Office.

The pandemic did not change much on this trend. In August 2020, a frustrated Seema Verma, then administrator of the Federal Centers for Medicare & Medicaid Services, warned nursing home operators that “significant deficiencies in infection control practices” were responsible for increases in coronavirus deaths and begged them “to truly double it. practice.”

“Philosophically, if a payer wants to tell the provider how to spend their funds within certain parameters, I understand that, but that’s not it. [New York] law does, “said Clyne.” The law goes beyond that. The state tells the provider how much of other people’s money they also have to spend on care, not just state money. “

Bills paid by Medicare or individuals should be excluded from the mandate along with Medicaid funds earmarked for purposes such as mortgage expenses, he said.

Medicaid, funded under a state and federal government partnership, provides health insurance to low-income people. It typically pays for about 60% of the nursing home nationwide, usually for long-term residents with chronic health problems.

Medicare, funded by federal dollars, insures the elderly or disabled adults and provides about 16% of the facilities’ revenue. The rest comes from private Medicare Advantage, other health insurance companies and people who pay for their own care.

“Nursing homes are primarily funded by public tax dollars, Medicaid or Medicare – and the public has reason to worry about how our dollars are being spent,” said Milly Silva, executive vice president of 1199SEIU, the union representing 45,000 nursing home workers in New York. and New Jersey and backed legislation in both states.

Expenditure mandates are not a new idea for healthcare. The Affordable Care Act requires health insurance companies to spend at least 80 cents of every dollar in premiums for pay for the health needs of the recipients. What is left can go to administrative costs, executive salaries, advertising and profits. Companies that exceed the limit must reimburse the difference to beneficiaries.

Harrington disagrees with industry officials who want to exclude Medicare dollars from calculating how much nursing homes should spend on direct care. That would leave a large source of profits untouched, she said, and allow them to spend the money “wherever you want.”

Medicare paid nursing homes $ 27.8 billion in fiscal year 2019, according to the Medicare Advisory Payment Commission, an independent panel appointed by Congress.

Although only Medicaid money is affected, there is still a major problem in the mandate for direct care spending, Aronson said.

“90 percent of the facilities lose money,” he said, because Medicaid payments do not cover the cost of care. In New Jersey, he said, the shortfall is $ 40 a day. resident.

But some state lawmakers are not convinced.

New York State Attorney Richard Gottfried:

New York State Attorney Richard Gottfried: “Medicaid payments may not fully cover the cost of care, but somehow earn nursing homes for profit.”
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“Medicaid payments may not fully cover the cost of care, but somehow benefit nursing homes,” said New York State Attorney Richard Gottfried, who has chaired the Assembly’s health committee since 1987.

More than two-thirds of state nursing homes operate as for-profit businesses and have been able to hide some of those profits in affiliates they own and employ, he said. They can “use real estate gimmicks and shell contracts to make it look like they’re spending money when what they’re really doing is just sucking income into their own pockets,” he said.

The use of such “affiliates” payments has taken place across the country for several years.

In order to uncover the true revenues and expenses of the facilities, the state’s mandates require accurate documentation.

“If they file false evidence, it will be a crime,” Gottfried said.

The spending mandates come as the industry is still recovering from the worst pandemic and is facing staff shortages and low occupancy.

New York City Councilman Ron Kim.

New York City Assemblyman Ron Kim, whose uncle died at a nursing home of suspected COVID, said lawmakers should be able to tell nursing home operators how to spend taxpayers’ money.
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But New York City Assemblyman Ron Kim, whose uncle died at a nursing home of suspected COVID, said lawmakers should be able to tell nursing home operators how to spend taxpayers’ money.

“If they choose to rely on public money to provide care, they take on a greater responsibility,” Kim said. “It’s not like running a hotel.”

KHN (Kaiser Health News) is a national newsroom that produces in-depth journalism on health issues.

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