Texas Floats Plans to Boost Medicaid Funding Through SNF Quality Program

After a high-profile bankruptcy in December of last year, Texas now has two bills that aim to provide some Medicaid reimbursement relief to skilled nursing providers in the state.

The bills, Senate Bill 1050 and House Bill 3342, would establish a long-term care quality provider participation program (QPPP) in the state that provides additional compensation to nursing facilities that meet certain quality metrics. The bills would also seek to boost overall Medicaid funding by creating a pool of incentive money for innovative and high-quality SNFs, funded with annual payments from all operators in the state.

The most providers could get out of the program, if it is enacted, would be about $18 per resident per day, which does not stanch the average loss of $27 per Medicaid resident per day, Scot Kibbe, Texas Health Care Association (THCA) director of government relations, told Skilled Nursing News. But it “would make a significant dent in it and help enormously the facilities that are struggling,” he said.

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The THCA is the local affiliate of the American Health Care Association (AHCA), a trade group for for-profit nursing homes.

Distress in Texas

The proposed legislation comes just months after Dallas-based Senior Care Centers, one of the largest providers in the state of Texas with more than 10,000 residents and almost 11,000 employees, filed for Chapter 11 bankruptcy. More recently, Omega Healthcare Investors, Inc. (NYSE:OHI) had a Denton, Texas-based operating tenant underpay about $4 million in rent.

“While Daybreak has implemented many favorable changes to their business, the operating environment in Texas remains challenging near-term, with low occupancy and one of the lowest Medicaid reimbursement rates in the country,” Omega CEO Taylor Pickett said in the real estate investment trust’s (REIT) fourth quarter earnings press release.

In addition, Genesis HealthCare announced in April last year that it would exit the state entirely, Kibbe noted.

LTC Properties (NYSE: LTC) CEO Wendy Simpson, whose company is in the process of installing new tenants at 11 of its properties currently operated by Senior Care Centers, specifically pointed to the bills as a reason for optimism in the state going forward.

“We are closely monitoring the current biennium legislative session in Texas pertaining to a proposed provider tax bill that the for-profit skilled nursing industry has long supported,” Simpson said during the REIT’s fourth-quarter 2018 earnings call earlier this month. “Passage of such a bill would bring needed relief to many operators in Texas and positively impact coverage in LTC’s skilled portfolio.”

With a strong economy making it hard to recruit workers to begin with, the low reimbursement for Medicaid from Texas exacerbates the issue, Kibbe said. And with 62% of the Lone Star State’s nursing facility residents depending on Medicaid, the low reimbursement is a widespread issue for providers in the state.

If the bills are enacted by the Texas Legislature, nursing homes under their jurisdiction — exceptions include state-owned veterans’ facilities, nonprofits and continuing care retirement communities (CCRCs) — will pay a quality provider participation payment that is calculated annually by the state Health and Human Services Commission. Nursing facilities cannot charge this payment to their residents.

The funds would go to a trust fund held by the Texas comptroller, outside the state treasury, and would be distributed along with any corresponding federal matching funds, according to the bills. After covering the costs of developing and administering systems for the program and reimbursing the Medicaid share of the payment, the remainder would be distributed to SNFs. Half of that remainder would go to Medicaid-eligible nursing homes that show a history of expenditures for capital improvements, renovations, or other improvements related to direct care services.

The other 50% wold go to nursing facilities based on several factors, in order: performance under the Centers for Medicare & Medicaid Services (CMS) Five-Star Quality Rating System, increased investments in direct care staffing and resident programming and the development and funding of additional quality payments for unique long-term care needs that are not funded separately.

In practice, this means facilities would get about $9 per Medicaid resident per day to go to core functions. SNFs that do well on quality metrics could earn back an additional $9 at most, Kibbe explained.

The program is similar to ones in 43 other states and the District of Columbia, but it would be new to Texas if it is enacted, Kibbe noted. And with federal matching funds, the state would receive approximately $2.50 from the federal government for every $1 committed to Washington, according to the Texas Health Care Association.

The average daily Medicaid rate per day is $143, but with the QPPP, it would rise to $160, THCA said. That compares to an average cost per diem of $170 for Texas, the organization noted, citing Medicaid shortfall report data from 2016.

The headaches from the Medicaid shortfall go beyond just cash flow, Kibbe noted. The challenge of keeping staff — the turnover rate can be 97% on average for nurses and CNAs, according to Kibbe — worsens quality issues by making it difficult for residents and staff to form meaningful relationships. Implementing the QPPP would help the residents, he told SNN.

“The funding would help us address that,” he said. “It would help us bring up our quality, be able to pay staff, keep staff.”

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