Legislators Question If State Funding for Nursing Homes Is Sufficient

Andrew Kitchenman | April 17, 2013 | Health Care
Financial stability of facilities in doubt as state prepares for new payment system

Some of New Jersey’s nursing homes are on a crash course, headed for insolvency, legislators warned state officials at a budget hearing on Medicaid yesterday.

Assemblyman Gary S. Schaer (D-Bergen and Passaic) noted that the state has cut Medicaid reimbursements to the homes in recent years. He followed up by asking officials how they could decide to recommend no change in the funding in the coming fiscal year without considering their financial position.

“There’s only so long you can operate in the red before you decide that you can no longer operate,” Schaer said. Medicaid, a state and federally funded program, provides the majority of revenue for nursing homes.

How nursing homes get paid has been a contentious issue as the state begins to change the way it reimburses providers of long-term care for elderly and disabled residents. Under a global waiver from federal Medicaid rules, the state plans to increase payments for home- and community-based care, raising concerns among nursing home operators that they will lose the money they need to operate. In July 2014, the state is shifting from fee-for-service to managed care, in which payments are based on patient outcomes.

During the transition period, lawmakers urged state officials to ensure that nursing homes remain open. Demand for nursing homes may drop in the near term, as the elderly are compensated for costs they incur in order to remain in their homes as long as possible. But the aging population is expected to increase demand for nursing homes over time.

State Human Services Commissioner Jennifer Velez, whose department oversees Medicaid, defended the budget proposal. She said officials chose to leave the funding formula for nursing homes unchanged from last year because they didn’t want to harm any one facility.

If the formula were changed, some facilities would lose money, “which I think would have prompted many more homes to close quickly,” Velez said, citing the 17 nursing homes that are operated by county governments as having benefited from the state’s decision.

Paul Langevin, president of nursing home group the Health Care Association of New Jersey, said during a break in the hearing that the budget proposal is part of an ongoing erosion of state support for nursing facilities.

“Everyone wants to jump on the bandwagon of, ‘It’s cheaper and better to care for people at home,’ ” Langevin said, before adding that in many situations, residents receive better and less expensive care at nursing homes. He also said that residents at the facilities benefit from social interactions.

“I’m not worried that there will be enough business for nursing facilities in the future, I’m more concerned that we won’t have enough funding for the ones we have now when the need comes along,” he said.

Langevin said that the Medicaid reimbursement formula is insufficient to cover patient costs, and puts companies in a difficult position when they begin negotiating rates with insurers under the managed-care system that will be put in place next year.

“Part of their response will be, ‘That’s what the state paid you, so it must be adequate,’ “ Langevin said.

He said some homes have had their financial situation worsened by an agreement struck by the Corzine administration, in which the payment formula was changed to direct more money to facilities that accept patients with more severe conditions. But when some facilities accepted these patients, the state didn’t follow through due to budgetary constraints.

He declined to estimate how many of the state’s 359 nursing homes would close if they don’t receive more state funds.

Schaer, whose mother has Alzheimer’s disease and is living in a nursing home, expressed frustration that the state doesn’t have more financial information about these facilities, similar to what it has for hospitals.

“If in fact we don’t know the financial situation of nursing homes generally and specifically, how is it that we can make recommendations” that will affect their budgets, Schaer questioned.

Officials said the state has requested current financial information from nursing home operators, but have been rebuffed by the industry. Velez called on legislators to help encourage the operators to share more information.

Schaer said the state’s current approach might leave it too little time to act before nursing homes close.

“We need to know whether these facilities can survive,” Schaer said. He noted that officials with the skilled nursing facility Cheshire Home, based in Florham Park, have said they will run out of money within three years. He said that leaving the formula unchanged has provided some facilities with more money than they need, while others don’t have enough.

Later in the hearing, Velez noted that the state monitors the care provided by the homes closely and hasn’t seen any problems with residents not having access to nursing care.

She added that the current Medicaid payment system is biased in favor of nursing homes, but the waiver will allow the state to meet individual needs, including at residents’ homes.

While other Democratic legislators joined Schaer in expressing their concerns to Velez, Republican lawmakers supported the state. Assemblyman Christopher J. Brown (R-Atlantic, Burlington, and Camden) said he was encouraged by officials’ efforts to pursue the comprehensive waiver, adding that his grandmother was able to stay in her house until the end of her life.