Oklahoma Cities Snap Up Nursing Homes in Gamble for Federal Funds

Several small cities in Oklahoma now hold the licenses to operate dozens of nursing homes in the state, in the hopes of getting funds from a federal bonus payment program offered through the Centers for Medicare & Medicaid Services (CMS), Oklahoma Watch reported this week.

Licenses for 46 nursing homes in the state are now owned by cities or towns, with Pauls Valley, Okla., holding licenses for 28 nursing homes across the state; Hugo, Okla., owns 12 homes, the publication reported. A city can become the designated license owner, under an arrangement that the state calls an ‘upper payment limit owner, and set an agreement for management services.

The term “upper payment limit” refers to an extra payment that brings lower Medicaid payments up to the level offered by Medicare — and it’s that payment that the cities are hoping to obtain. Oklahoma recently applied for the Nursing Facility Upper Payment Limit program, offered via CMS, which grants the extra Medicaid payments to qualifying nursing homes. If the state’s most recent application goes through, nursing homes could get an extra $7.7 million in Medicaid funds in the current federal fiscal year; another $18.5 million is projected for next year.


Oklahoma’s first proposal for the program was rejected by CMS last year, but the state reapplied this April, and the Oklahoma Health Care Authority (OHCA) is in the process of answering a second round of questions from CMS. It hopes to finalize its responses by the middle of October, HCA spokeswoman Katelynn Burns told Oklahoma Watch.

Nineteen city-owned nursing homes have applied for the program so far, according to the publication. The cities do not manage the day-to-day operations of the nursing homes, but hold the licenses to operate them and sign management agreements, often with the prior owners of the homes. Most of the ownership transfers came in June 2017, after an opinion from Attorney General Mike Hunter determined that cities that want to own nursing homes under the program would not need to go through the change-of-ownership and certificate-of-need process mandated for private owners and operators of nursing homes.

Some of the nursing homes in question have low ratings from CMS, with seven owned by Pauls Valley having one star, Oklahoma Watch noted. Pauls Valley is hoping to bolster its financially troubled hospital, which the city also owns, through the extra nursing home money.


“We saw it as a way to provide much-needed revenue to the hospital,” James Frizell, Pauls Valley’s city manager, told Oklahoma Watch.  “The city gets a cut, but again, it goes back into health care. It goes back into our hospital, to help keep our hospital open. They are just kind of under the umbrella of the City of Pauls Valley, but other than that, we do not actually own them.”

The spike in city-owned nursing homes is a result of Oklahoma’s low Medicaid payment rates to nursing home owners, Nico Gomez, president and CEO of the Oklahoma Association of Health Care Providers, told the publication.

The cities do have to put up funds to get the extra money from the federal government, and they remit that money to the OHCA. Pauls Valley would contribute $2.3 million for 10 of its nursing homes, though it would receive more in supplemental payments if the program is approved, Oklahoma Watch said.

But that approval isn’t finalized yet. Federal officials had a list of questions for Oklahoma after its second proposal, including inquiries about the expertise of the cities for nursing home operations, the publication noted.

“Based on the available information, the city council members and city employees do not appear to have any experience operating nursing facilities,” CMS said in the document. “Please explain how the cities will ensure the nursing home residents receive quality care.”

Written by Maggie Flynn

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